Text

Status of Decommissioning Funding
	ML050960040
Person / Time
Site:	Palo Verde
Issue date:	03/30/2005
From:	Overbeck G; Arizona Public Service Co
To:	; Document Control Desk, Office of Nuclear Reactor Regulation
References
	102-05238-GRO/TNW/DWG
	Download: ML050960040 (200)
	v • d • e

Z A

LS A subsidiary of Pinnacle West Capital Corporation 50.75(f)(1)

Gregg R. Overbeck Mail Station 7602 Palo Verde Nuclear Senior Vice President TEL (623) 393-5148 P.O. Box 52034 Generating Station Nuclear FAX (623) 393-6077 Phoenix, AZ 85072-2034 102-05238-GRO/TNW/DWG U. S. Nuclear Regulatory Commission March 30, 2005 ATTN: Document Control Desk Mail Station P1-37 Washington, DC 20555

Dear Sirs:

Subject:

Palo Verde Nuclear Generating Station (PVNGS)

Units 1, 2, and 3 Docket Nos. STN 50-5281529/530 Status of Decommissioning Funding In accordance with the requirements of 10 CFR 50.75(f)(1), Arizona Public Service Company (APS) is submitting the status of the decommissioning funding for PVNGS Units 1, 2, and 3. APS is relying upon the 2004 Annual Funding Status Report from each Participant Owner in providing the information in this report with respect to each Participant's current funds, as well as future funding plans and assumptions.

The report and its appendices, provided in Enclosure 1, contain the status of decommissioning funding for each PVNGS unit and for each of the owners.

This letter does not make any commitments to the NRC.

If you have any questions, please contact Thomas N. Weber at (623) 393-5764.

Sincerely, CI. /e GRO/TNW/DWG/ca

Enclosure:

1. 2004 Decommissioning Funding Status Report for Palo Verde Nuclear Generating Station Units 1, 2 & 3 cc:

B. S. Mallett M. B. Fields G. G. Wamick A. V. Godwin [ARRA]

A member of the STMRS (Strategic Teaming and Resource Sharing) Alliance Callaway a Comanche Peak

Diablo Canyon

Palo Verde

South Texas Project

Wolf Creek 2004 Decommissioning Funding Status Report for Palo Verde Nuclear Generating Station Units 1, 2 & 3

2004 DECOMMISSIONING FUNDING STATUS REPORT 10 CFR 50.75(f)(1)

(For The Year Ending December 31, 2004)

PALO VERDE NUCLEAR GENERATING STATION, UNITS 1, 2 & 3 Submitted on Behalf of Arizona Public Service Company Salt River Project Agricultural Improvement and Power District El Paso Electric Company Southern California Edison Company Public Service Company of New Mexico Southern California Public Power Authority Los Angeles Department of Water and Power Page 1 of 5

OVERVIEW This Decommissioning Funding Status Report is being submitted pursuant to 10 CFR 50.75(f)(1) by Arizona Public Service Company (APS) as the operator of Palo Verde Nuclear Generating Station (PVNGS), Units 1, 2 & 3. APS is submitting this report on behalf of the seven Participants in PVNGS:

Participant

%Share of Each Unit

1. Arizona Public Service Company (APS) 29.10

2. Salt River Project Agricultural Improvement and Power District (SRP) 17.49

3. El Paso Electric Company (EPE) 15.80

4. Southern California Edison Company (SCE) 15.80

5. Public Service Company of New Mexico (PNM) 10.20

6. Southern California Public Power Authority (SCPPA) 5.91

7. Los Angeles Department of Water and Power (LADWP) 5.70 Pursuant to Sections 8A.4 and 8A.7.2.4 of the PVNGS Participation Agreement, as amended through Amendment 14, each Participant provides an annual decommissioning funding status report for review by the Termination Funding Committee established pursuant to the PVNGS Participation Agreement. APS is relying upon the 2004 Annual Funding Status Report from each Participant in providing the information in this report with respect to each Participant's current funds, as well as future funding plans and assumptions.

(1) DECOMMISSIONING FUNDS ESTIMATED TO BE REQUIRED In a report dated February 2002, TLG Services. (TLG) issued the 2001 site-specific Decommissioning Cost Study for PVNGS. This study includes cost estimates for basic NRC radiological decommissioning within the meaning of 10 CFR 50.75(b) & (c) (hereafter, Basic Radiological Decommissioning), as well as for spent fuel management and for non-radiological decommissioning activities.

The 2001 Total Decommissioning Costs for each unit and the Basic Radiological Decommissioning costs can be broken down as follows (in millions of dollars):

PVNGS Unit Total Decommissioning Basic Radiological Cost Estimate Decommissioning Unit 1

$615.8

$481.3 Unit 2

$673.3

$539.8 Unit 3

$683.0

$537.7 Each participant is entitled to exercise its own judgment regarding additional contingency factors and scope of work beyond the scope of work assumed in TLG's site specific study. In addition, assumptions regarding decommissioning cost escalation and trust fund earnings may affect funding levels. Therefore, Participants may accumulate funds based upon a Basic Radiological Page 2 of 5

Decommissioning Cost Estimate and Total Decommissioning Cost Estimate that exceed the amounts noted above. Regardless of such independent judgments, each Participant meets NRC requirements for purposes of estimating the decommissioning funds to be required, because the site specific estimates of costs noted above for the Basic Radiological Decommissioning of each PVNGS unit exceed the NRC minimum formula amount calculated in accordance with 10 CFR 50.75(c), NUREG-1 307, Rev. 10, Report on Waste Burial Charges:

Changes in Decommissioning Waste Disposal Costs at Low-Level Waste Burial Facilities, and Regulatory Guide 1.159, Assuring the Availability of Funds for Decommissioning Nuclear Reactors, as of September 2003.

(2) AMOUNT OF FUNDS ACCUMULATED AS OF DECEMBER 31. 2004 The total amounts of funds accumulated by each Participant in their respective Nuclear Decommissioning Trusts for each unit as of December 31, 2004 are provided in Appendix A, Tab 1 (Unit 1), Tab 2 (Unit 2), & Tab 3 (Unit 3). These values reflect the fair market value as reported by the respective Trustees at the end of calendar year 2004. In addition, in order to put the current levels of funding in perspective, the charts for each unit provided in Appendix A include:

(1) a breakdown for each unit of each Participant's percentage share of the 2001 Total Decommissioning Cost Estimate and (2) the years remaining on the unit's operating license. Note that the cost estimates are in 2001 dollars and do not take into account the individual assumptions made by each Participant, which may result in the accumulation of funds based upon higher cost estimates (e.g.,

site-specific estimates that may include removal and disposal of spent nuclear fuel and non-radioactive structures).

(3) SCHEDULE OF ANNUAL AMOUNTS REMAINING TO BE COLLECTED AND ASSUMPTIONS Pursuant to the Participation Agreement, as amended and reformed, the Participants agreed that each Participant would commit to minimum levels of accumulation of funds, regardless of fund investment performance, pursuant to a pre-established percentage funded commitment or "Funding Curve" for each year through the end of plant life. Each Participant's percentage funding commitment was based upon an analysis which incorporated the Participant's individual business judgments (subject to regulatory approvals, as applicable) with respect to expected rates of fund investment earnings and escalation in total decommissioning costs. Every three years a site-specific decommissioning cost estimate is performed, and each participant applies the new cost estimate to its pre-established Funding Curve. A new Decommissioning Cost Estimate will be completed in 2005 for the year ending in 2004. Each Participant is committed to minimum levels of accumulations, which cannot drop below a Funding Floor (which is never less than eighty percent of the Participant's Funding Curve and was established to take into account market fluctuations in the early years of fund accumulation). These minimum commitment levels are based upon the liquidated, after-tax value of the funds. As such, the unliquidated values relied Page 3 of 5

upon for purposes of NRC's decommissioning financial assurance requirements currently exceed these minimum commitment levels with respect to funds held by the investor-owned utility Participants in PVNGS. For the non-investor-owned Participants, the liquidated and unliquidated values are the same.

The current accumulation and funding schedules submitted in the 2004 Annual Funding Status Reports are based upon a 2001 site specific decommissioning cost estimate, that is escalated by each Participant. The tables and charts submitted by each Participant in the 2004 Annual Funding Status Reports are provided in Appendix B, Tabs 1, 2, 3, 4, 5, 6 & 7. (These Tabs correlate with the numbers assigned to Participants in the "Overview" above, which were assigned in descending order based upon the percentage share size of each Participant.)

The assumptions underlying each Participant's analysis are provided in Section 2.1.7 of the 2004 Annual Funding Status Reports. These assumptions reported by each Participant are restated, respectively, in Appendix B, Tabs 1, 2, 3, 4, 5, 6

&7.

Actual annual contributions of each Participant may vary from the annual contributions reflected in the tables provided in Appendix B, based upon actual fund performance and other factors. Each Participant is committed to maintaining the accumulation of funds established by the funding percentage curves, rather than any pre-established annual contribution.

(4) CONTRACTUAL OBLIGATIONS PURSUANT TO (e}(1)(v)

No PVNGS Participant is relying upon a contract for purposes of providing decommissioning funding within the meaning of 10 CFR 50.75(e)(1)(v).

(5) MODIFICATIONS TO LICENSEES' METHODS OF PROVIDING FINANCIAL ASSURANCE SINCE PREVIOUS REPORT There have been no modifications to the licensees' methods of providing financial assurance.

(6) MATERIAL CHANGES TO TRUST AGREEMENT The Master Trust Agreements of each of the Participants have been amended as referenced below:

Participant Date Amended Reference Location APS December 19, 2003 Appendix C, Tab 1 SRP November 19, 2003 Appendix C, Tab 2 EPE December 18, 2003 Appendix C, Tab 3 SCE December 23, 2003 Appendix C, Tab 4 PNM December 16, 2003 Appendix C, Tab 5 Page 4 of 5

SCPPA LADWP November 1, 2003 February 4, 2004*

Appendix C, Tab 6 Appendix C, Tab 7 There have been no other amendments to the Trust Agreements of the various Participants since the last status report to the NRC.

The following Table provides the names of the current Trustees and Investment Managers as reported by each Participant in Section 1.1 of their 2004 Annual Funding Status Reports to the Termination Funding Committee.

Participant Trustee(s)

Investment Manager(s)

APS Mellon Bank NISA Investment Advisors Mellon Capital Delaware Investment Advisers SRP Marshall & lisley The Vanguard Group Trust Company of PIMCO Capital Management Arizona EPE Bank of America, N.A.

Duff & Phelps Investment Management SCE Mellon Financial STW Fixed Income Management PanAgora Asset Management BlackRock Financial Management Alliance Bernstein PIMCO State Street Global Advisors PNM Mellon Bank, N.A.

Strong Capital Management First Quadrant, LP T. Rowe Price Associates, Inc.

Philadelphia International Advisors SCPPA US Bank Trust, N.A.

None LADWP US Bank Trust, N.A.

None

The amendment to the master trust agreement was authorized by the Los Angeles City Council pursuant to Resolution 004 130 on December 2, 2003. The counter party to the amendment, the trustee, US Bank National Association, executed the amendment on February 4, 2004.

Page 5 of 5

Appendix A, Tab I Palo Verde Nuclear Generating Station Unit 1

($M)

Participants Ownership Arizona Public Service Company Salt River Project Agricultural Improvement and Power District El Paso Electric Company Southern California Edison Company Public Service Company of New Mexico Southern California Public Power Authority Los Angeles Department of Water and Power TOTAL 29.10 %

17.49 %

15.80 %

10.20 %

5.91 %

5.70 %

100.00%

Total (1)

Site Specific Estimate 179.2 107.7 97.3 97.3 62.8 36.4 35.1 615.8 NRC (1)

Basic Radiological Estimate 140.0 84.2 76.0 76.0 49.1 28.4 27.4 481.3 Total Nuclear Decommissioning Trust (as of 12/31/2004) 88.1 (2) 51.3 (3) 30.5 (4) 194.3 (5) 31.6 (6) 41.8 (7) 31.7 (8)

Years to end of Operating License (06/01/2025) 20.5 20.5 20.5 20.5 20.5 20.5 20.5 469.7 (1) - Decommissioning Cost Study for PVNGS in 2001 Dollars, prepared by TLG Services, Inc. (February, 2002)

(2) - Section 2.2 of APS 2004 Annual Funding Status Report (3) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (4) - Section 2.2 of EPE 2004 Annual Funding Status Report (5) - Section 2.2.2 of SCE 2004 Annual Funding Status Report - Note: SCE accumulates funds based upon cost estimates that exceed the amounts noted above due to SCE judgments with respect to contingency factors also affected by assumptions regarding decommissioning cost escalation and trust fund earnings (6) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (7) - Section 2.2.2 of SCPPA 2004 Annual Funding Status Report (8) - Section 2.2.2 of LADWP 2004 Annual Funding Status Report

Appendix A, Tab 2 Palo Verde Nuclear Generating Station Unit 2

($M)

Participants Ownership Total (1)

Site Specific Estimate NRC (1)

Basic Radiological Estimate Total Years Nuclear to end of Decommissioning Operating Trust License (as of 1213112004)

(04/24/2026) 94.2 (2) 21.3 50.3 (3) 21.3 31.6 (4) 21.3 Arizona Public Service Company Salt River Project Agricultural Improvement and Power District El Paso Electric Company Southern California Edison Company Public Service Company of New Mexico Southern California Public Power Authority Los Angeles Department of Water and Power TOTAL 29.10 %

17.49 %

15.80 %

10.20 %

5.91 %

5.70 %

100.00%

195.9 117.8 106.4 106.4 68.7 39.8 38.4 673.3 157.1 94.4 85.3 85.3 55.1 31.9 30.8 196.5 (5) 33.1 (6) 42.5 (7) 31.6 (8) 21.3 21.3 21.3 21.3 539.8 480.2 (1) - Decommissioning Cost Study for PVNGS in 2001 Dollars, prepared by TLG Services, Inc. (February, 2002)

(2) - Section 2.2 of APS 2004 Annual Funding Status Report (3) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (4) - Section 2.2 of EPE 2004 Annual Funding Status Report (5) - Section 2.2.2 of SCE 2004 Annual Funding Status Report - Note: SCE accumulates funds based upon cost estimates that exceed the amounts noted above due to SCE judgments with respect to contingency factors also affected by assumptions regarding decommissioning cost escalation and trust fund earnings (6) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (7) - Section 2.2.2 of SCPPA 2004 Annual Funding Status Report (8) - Section 2.2.2 of LADWP 2004 Annual Funding Status Report

Appendix A, Tab 3 Palo Verde Nuclear Generating Station Unit 3

($M)

ParticiDants

Ownershi, Total (1)

Site Specific Estimate NRC (1)

Basic Radiological Estimate Arizona Public Service Company Salt River Project Agricultural Improvement and Power District El Paso Electric Company Southern California Edison Company Public Service Company of New Mexico Southern California Public Power Authority Los Angeles Department of Water and Power TOTAL 29.10 %

17.49 %

15.80 %

10.20 %

5.91 %

5.70 %

100.00%

198.8 119.5 156.5 94.0 Total Nuclear Decommissioning Trust (as of 12/31/2004) 85.2 51.9 27.6 212.1 28.8 46.9 31.7 107.9 107.9 69.7 40.4 38.9 85.0 85.0 54.8 31.8 30.6 (2)

(3)

(4)

(5)

(6)

(7)

(8)

Years to end of Operating License (11/25/2027) 22.9 22.9 22.9 22.9 22.9 22.9 22.9 683.0 537.7 484.4 (1) - Decommissioning Cost Study for PVNGS in 2001 Dollars, prepared by TLG Services, Inc. (February, 2002)

(2) - Section 2.2 of APS 2004 Annual Funding Status Report (3) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (4) - Section 2.2 of EPE 2004 Annual Funding Status Report (5) - Section 2.2.2 of SCE 2004 Annual Funding Status Report - Note: SCE accumulates funds based upon cost estimates that exceed the amounts noted above due to SCE judgments with respect to contingency factors also affected by assumptions regarding decommissioning cost escalation and trust fund earnings (6) - Section 2.2.2 of PNM 2004 Annual Funding Status Report (7) - Section 2.2.2 of SCPPA 2004 Annual Funding Status Report (8) - Section 2.2.2 of LADWP 2004 Annual Funding Status Report

Palo Verde Nuclear Generating Station Appendix B, Tab 1 Units 1, 2, & 3 APS 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Model Assumptions Decommissioning Costs Assumed Rate of Earnings Assumed Rate of Cost Escalation Contributions 2001 TLG Study escalated for three years 6.7500%

5.0000%

Quarterly

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT ONE Based on 2001 Cost Study Rate of ROWu 6.7500% Annal Peiod Rat of Return 1.6875% Quarte Period Rate of Retwn 5.0000% Annual Escaltion Fikut Quarter Secnd Quarter Quarter Fourth Quarter Controi)

Contra Contt Con" Quarter Eanln Quar Ewnlngs Quarter Earn Quauter Earphg ANNUAL Year Conr E!

to Date Conbti Esnkvs to Date Conlrlb EaEwti to Date Contrb E

toDa CONTRt85 2004 82,378,934 2005 1.326.682 1,390.145 86.09.761 1.326.682 1.435,991 871.56,434 1,326.682 1,462,611 90.687,728 1.326.882 1,530.018 93,524,428 5,306.729 2006 1,326.682 1.578.225 96,429,335 1,328.682 1.827.245 99,383,262 1.326.662 1.677.093 102.387,037 1,328.682 1.727.781 105,441,501 5,306,729 2007 1.326.862 1.T79,326 106,547.508 1.326.682 1.831.739 111,705,930 1.326.862 1.685.036 114,917,850 1.326,682 1.939.235 118.163,567 5.306.729 2008 1.326.682 1,994.348 121,504,597 1,326.602 2.050,390 124,881.670 1,326,682 2.107.378 128,315,730 1,326.682 2,165,328 131,807,741 5,306,729 2009 1.326,682 2,224,256 135,356,679 1.326.682 2.264.178 138.989,539 1,326,682 2,345,111 142,641.332 1.326,682 2,407,072 148.375.087 5.306,729 2010 1,326,662 2.470.080 150.171.u49 1,326.682 2.534.150 154,032,681 1,326,s62 2.599.301 157,956.es 1.326.682 2.6685552 161,950,900 5.306.729 2011 1.326.682 2.732,921 166.010.503 1.32e68s2 2,801,427 170,138,613 1.326,682 2,871.089 174,336.364 1,32e6,82 2,941.926 178,604,993 5.306,729 2012 1,326,882 3.013,959 182,945,635 1,326.682 3,w07.208 187,359.525 1.328.682 3.161,692 191,847,86 1,326.682 3,237,433 196,412.015 5,306,729 2013 1.326,662 3,314,453 201,053.150 1,326.662 3,392,772 205.772,6e4 1.326,882 3,472,413 210.571.699 1,326,682 3,553.397 215,451,779 5,306,729 2014 1,326,682 3,635,749 220,414,210 1,326.882 3,719.490 225,460,382 1,326.682 3,604.644 230,591.708 1,326,682 3,891.235 235,809,626 5.306,729 2015 1,326,682 3,979,287 241.115.595 1,326.682 4,088,826 246.511,103 1,326,662 4,159,875 251.997,681 1,32,8682 4,252.461 257.576.804 5,306,729 2016 1,326.662 4,346,609 263.250,094 1,326.682 4,442.345 269,019,122 1,326,682 4,539,698 274,s65.502 1.326.681 4,638.693 280,850,876 5.306.728 2017 1.326,682 4,739,359 288,916.917 1,326.682 4.841,723 293.085,322 1,326,682 4,945,815 299.357.820 1,3286,82 5,0510663 305.735,165 5,306.729 2018 1.326,662 5,159,296 312,222.145 1.328,682 5,268.749 318.517,576 1.326.662 5.360.047 325,524,305 1,326,682 5,493,223 332.344,210 5.306,729 2019 1,326,682 5,608,309 339,279.201 1,326.682 5,725,337 348.331.220 1,32,8682 5.844.339 353,502,242 1,324,581 5,965,350 360.792,173 5.308.729 2020 1.326.882 6,088,368 368,207,224 1,326,682 6,213.497 375,747,403 1.326.682 6,340.737 383,414,823 983,277 6,470.125 390,86225 5,306,729 2021 1.326.682 8,595,901 396,790,809 1,326,682 6.729,595 406.847.088 1,326,682 6,865,545 415,039.313 966,879 7,003,708 423,009,980 5,306.729 2022 1,326,682 7,138,293 431.474.956 1,320.682 7,281,140 440,082,778 1,326,682 7.426.397 448,835,858 924,568 7,574,105 457.334,530 5,30e,729 2023 1,328.682 7,717,520 466,378,733 1,326,882 7,870,141 475,575,556 1,326,682 8,025,338 484,927,578 (3,803,807) 8,183.153 489,306,922 5,306.729 2024 1,326,662 8.257,054 496,890s,59 1,326.682 8,418,7860 506,36121 1.328.682 6,583,235 518,548,038 (4,298,979) s,750.4e4 522,997,523 5,308,72s 2025 0

0 0

(57,073,249) 35,302.333 501,228607 0

2026 0

0 0

(99,672,231) 33.832,796 435.387,173 0

2027 0

0 0

(82,218,356) 29,388e.34 382,557,450 0

2028 0

0 0

(85.629.810) 25,822,628 322,750,4e8 0

2029 0

0 0

(89.068,070) 21,765,657 255,468,055 0

2030 0

0 0

(61,490,028) 17,244,094 211,222,121 0

2031 D

0 0

(22,289.955) 14,257,493 203,189,659 0

2032 0

0 0

(16,825,378) 0 186,364,283 0

2033 0

0 0

(25,832,320) 0 160,531,963 0

2034 0

0 0

(38203,547) 0 122,328.415 0

2035 0

0 0

(44,920,034) 0 77.40e,382 0

2036 0

0 0

(63.935,147) 0 13.473,235 0

2037 0

0 0

(13,473,235) 0 (0) 0 F

WEIgA:

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&MI8,687 11*46 ku.87,4 8.872248 1MM06 8660448 t".8444 7J.684a 1277322 8,150.218 8.8OW87 6166. 4 "881.48U 88i0.48u 15.60.66 82.228.4 82.6,=iA 82.4222 10 1

8 82 82 84 is o8 S

a 78.184686E 6 W EcEL0DEC0MWA"RamV5466T

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ARIZONA PUBLIC SERVICE COMPANY NUCLEAR OECOMMISSIONING FUNDING REQUIREMENT UNIT ONE Base on 2001 Cost study ERafqb F~

eturn 5 0000%1 funding Curv t Funding Floor Actual Funding IYew Fund S Est. Cast

% Funded

% Band

% Floor S Floor

$ In Fund Eat. Cost

% FindedS 1991 1992 1993 1994 1995 19m 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2028 2027 2028 2029 2030 2031 2032 2033 2034 2036 2038 2037 8,358,799 11,132.220 16.329.125 21.885.801 27,827.153 30.0e1,526 38.08,s854 42,4540e4 52,694,980 e0.517.449 ss.858.947 74245,928 83.353,052 93,102.278 103,509.107 114.855,238 128,581,125 139.320.523 152,933.531 167.503.925 183,081.438 199,894,826

217.501.292 238,555,690 25ss900,587 278,651,433 301.895.985 326,809.447 353,373,241 381,619,828 411,916,988 444,052,014 478,380,828 s10,317,se5 538,938,033 615,820.88 443.713,738 384,784,958 318.074,330 242.813.370 191,851,078 178,039.179 169,274,493 150,614,282 118,031,271 76,788.800 13,473,235 122,538,455 8.82%

128.855.386 8.65%

135,098,858 12.09%

141.853.590 15.43%

148,948,270 18.88%

137,672.888 21.85%

144.558,530 24.95%

151,784,358 27.97%

170,388,508 30.93%

178,886,933 33.83%

187,631,260 38.88%

188.202.606 39.46%

197,612,736 42.18%

207,493,373 44.87%

217,868.042 47.51%

228,781,444 50.12%

240,199.516 52.69%

252,209,492 55.24%

284.819,966 57.75%

278,060,965 6024%

291,964,013 62.70%

306,862,213 85.14%

321.890.324 67.57%

337,984,840 e9.99%

354,884.082 72.39%

372,628.288 74.78%

391,259,701 77.16%

410,822.8S8 79.55%

431.383,820 81.92%

452,929.805 84.30%

475,215.720 88.88%

498,598,713 89.06%

523.108.428 91.45%

543,874.738 93.83%

585161.528 95.36%

533,492,893 98.85%

455.511,486 97.41%

391,957,788 98.17%

321,844.585 98.89%

244,205,340 99.43%

191.851.078 100.00%

178,039,179 100.00%

169,274.493 100.00%

150,614,282 100.00%

118,031,271 100.00%

76,.76,800 100.00%

13,473,235 100.00%

80%

5.46%

80%

6.92%

80%

9.67%

80%

12.34%

80%

14.94%

80%

17.48%

80%

.19.96%

80%

22.38%

80%

24.74%

80%

27.06%

80%

29.33%

80%

31.56%

80%

33.74%

80%

35.90%

81%

38.48%

82%

41.10%

83%

4373%

84%

46.40%

85%

49.09%

86%

51.81%

87%

54.55%

88%

57.32%

89%

80.14%

90%

62.99%

91%

85.87%

92%

68680%

93%

71.78%

94%

74.78%

95%

77.82%

9s%

80.93%

97%

84.08%

98%

87.28%

99%

90.54%

100%

93.83%

100%

95.36%

100%

9s.85%

100%

97.41%

100%

98.17%

100%

98.89%

100%

99.43%

100%

100.00%

100%

100.00%

100%

100.00%

100%

100.00%

100%

100.00%

100%

100.00%

100%

100.00%

6,887,023 8.905,776 13,063,300 17,508,641 22,261,723 24,065,220 28,853,483 33,963.267 42,155.984 48.413,980 55,087,158 59,396,742 88,682,442 74.481,821 83,842,376 94.017293 105,045,734 117,029,239 129,993,501 144,053,376 159,283,449 175,731,271 193.576,150 212,900,031 233.779,534 256,359,318 280,783,266 307,200,880 335.704.579 368.547.033 399,559,477 435,170,973 473,597,020 510.317.865 538,938,033 516,620,s88 443.713,738 384,784,958 318,074,330 242.813,370 191,851,078 178.039,179 189274,493 150.614,282 118,031,271 76,788,80 13,473,235 8,531,336 11,159.326 14,474,518 17,781,769 24,489,181 30,491.630 39,491.919 1 49.972.041 80,615.123 62,792,455 64,409,937 63,343.559 74,502,453 82,378,934 122,538,485 128065,38 135,098,658 141,853.590 148,946,270 137,872.888 144.558.530 151.714,358 170.388.508 178,8B6.933 187.831,280 188,202.608 197,612,738 207,493.373 6.98%

8.67%

10.71%

12.54%

16A3%

22.15%

27.32%

32.92%

35.58%

35.10%

34.29%

33.88%

37.74%

39.70%

FtEWuA

w j x c u a c c o u n ru1XHN

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOHM15MIONING FUNDING REQUIREMENT UNIT ONE 120%

100%

80%

01) 5 60%

U-1 40%

20%

0%

1 1

1 2

2 2

9 9

9 0

0 0

9 9

9 0

0 0

0 1

1 1

2 2

2 3

3 3

1 4

7 0

3 6

9 2

5 8

1 4

7.

0 3

6 Year

-+- Funding Curve --x-Funding Floor

Actual Funding wume

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT TWO Based on 2001 Cost Study Rate of Retu 6.7500% Annual Periot Rate of Return 1.0875% Quarter Pe1t Rate of ReOW 5.0000% Anuall Escalation First Quarter Second Quarter Third Quarter Fourth Quarter ContWb Contib Contrib ConIwib Quarter Eamnings Quarter Earnings Quarter Earnings Quart Earnings ANNUAL Year Contrib Erns toDa Conbtib Earnings to Date Contrib Earnings to Date Contrib Earnings to Dale CONTRIBS 2004 2005 1,309.945 2008 1,309,945 2007 1,309,945 2008 1.309,945 2009 1,309.945 2010 1,309,945 2011 1.309,945 2012 1.309,945 2013 1,309.945 2014 1.309.945 2015 1,309,945 2016 1.309,945 2017 1,309,945 2018 1,309,945 2019 1,309,945 2020 1.309,945 2021 1,309,945 2022 1.309.945 2023 1,309,945 2024 1,309,945 2025 1,309.945 2026 0

2027 0

2028 0

2029 0

2030 0

2031 0

2032 0

2033 0

2034 0

2035 0

2036 0

2037 0

1,512,896 1,708,315 191 7.263 2,140.676 2,379,555 2.634,971 2,908,069 3,200,074 3,512,293 3.846,126 4,203,070 4.584.725 4,992,600 5,429,126 5,895,658 6,394,487 6,927,848 7,498,133 8,107,898 8,759,875 9,456,968 0

0 0

0 92.475,921 104.251,748 116,842,785 130.305,47b 144.700,161 160,091.359 176,548,058 194,144,019 212,958.112 233,074,664 254,583,844 277,582,058 302,172.391 328,465.061 356,577,916 386,636,966 418,778,941 453,141,t98 489,885,669 529,178,548 571,181,030 0

0 0

0 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1.309,946 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 11309,945 1,309,945 1,309,945 1,309,945 0

0

.0 0

0 0

1,560,531 1,759,248 1,971,722 2,198,905 2,441,815 2,701,542 2,979,248 3,276,180 3,593,668 3,933,135 4.298,102 4,684,197 5,099,159 5,542,848 6,017,252 6.524,499 7.066,861 7,b4b,770 6,268,824 8,929,804 9,638,680 0

0 0

0 95.348,398 107,320,939 120,1274452 133,814,326 148.451.921 164,102,84 180,837,251 198,730,144 217,861,725 238.317,744 260.189,891 283,576,201 308,5e1,495 335,317.854 383,905,114 394,471,410 427,153,747 482,098,612 499,462,638 639.413.296 582,129,655 0

0 0

.0 0

0 0

0 1,309,945 1.309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1,309,945 1'309,945 1D309,945 0

0

.0 0

0 0

1,608,970 1,811,041 2,027,100 2,258,117 2,505,126 2,769,236 3,051,629 3,353,571 3,676,417 4,021,612 4,390,704 4,785,348 5,207,313 5,858,489 6,140,899 6,856,705 7,208,219 7,797,914 8,428.432 9,102,599 9,823,438 0

0 0

0 98,265,313 110,441,925 123,461,497 137,382,388 152,266,992 168,182,026 185,198,825 203,393,661 222,848,086 243,649,301 265,890,541 289,671,494 315,098,753 342,288,287 371,355,95a 402,438,060 435,671,911 471,206,472 509,201,015 649,825.841 593,263,038 0

0 0

0 89,653,081 1,309,945 1,658,227 101,233,485 1,309,945 1,863,707 113,615,577 1,309,945 2,083,413 126,854,655 1,309,945 2,318,326 141,010,661 1,309,945 2,569,505 158,148,443 1,309,945 2,838,072 172,330,043 1,309,945 3,125,230 189,634,000 1,309,945 3,432,268 205,135,874 1,309,945 3,760,561 227,918,593 1,309,945 4,111,582 249,070,828 1,309,945 4,486,903 271,667,389 1,309,945 4,888,206 295,869,846 1,309,945 5,317,291 321,725,989 1.309,945 5,776,081 349,372,314 1,309,945 6,268,632 378,932,534 1,309,945 6,791,142 410,639147 1,309,945 7,351,963 444,333,820 1,309,945 7,951,609 480,468,026 1,309,945 8592787 519,103,727 1,309,946 9,276,311 50.414,097 (31,335,919) 10,011,314 571,938,432 (151,327,449) 38,605,844 459,216t,28 (91,371,319) 30,997,136 398,842,644 (79,678.114) 26,921,878 346,0s66408 (80,006,174) 23,380,833 289,439;087 (67,887,453) 19,537,137 241,088,751 (41,009,342) 16,273.491 2t16.352,90 (21,456;6133) 14,603,821 209,500,107 (25,866,985) 14,141,257 197,774,379 (72,729,421) 0 125,044,959 (47,636,577)

.0 77,408,382 (63,935,147) 0 13,473,235 (13,473,235) 0 0

5,239,780 5,239,780 5,239,780 5,239,760 5,239,780 5,239,780 5,239,780 5,239,780 5,239,780 5,239,780 5,239,760 5,239,760 5,239,780 5,239,760 5,239,780 5,239,760 5,239,780 5,239,780 5,239,780 5,239,780 5,239,760 0

0 0

0 nFOe VmXC5LTEOWWIm n20AM

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT TWO ESTIMATED ANNUAL COSTS 2024 VW"$Is 1.0XO FV Dam 6ww V u"b I

2 3

4 5

6 PV Domn Yew 6

a 10 ii 12 13 14 2001 200J 204 20DS 2000 207 2009 2010 201 2012 2013 2014 2015 2019 2m7 2016 2019 2020 2021 2022 2023 2024 20ZS 2026 2027 2020 20Z 200 2031 2032 203 2034 203S 2020 2037 196.*18.36 205.714,287 216,00,D002 22X600,02 23J,140,02 XO0,047,0D2 262,5409.S2 275,676.820 206.480.861 303*,64 31g,130.379 33SOltl,111 351,841,242 67,O04.670 407.300,21 427.65,226 44,04,401 471,500.915 496.075,"1 516,826.75 645.21247 57,II2,209 601,767,920 631,!85,321 629,170"7 501.736.707 20,764,717 30,194.371 247,072.264 216,326,067 204,604,627 167,727" 120,747,14 76,76,0DO 13.473,235 10,122,436 10,626,557 11,150,19S 11,717,964 12,303,6 12,616.077 13,565,01 14,243,243 14,655.447 15,703216 16,4663.0 17,312,790 16.176,432 19,D07,201 20,041.72 21.043,815 22,066,006 23,20,60 24.3M,647 25,576*9 20,867.834 280,2.725 2B,610,761 31,061,20 3,45,611S 44,617,415 486*21,786 46.2f7f.7t 51,731.266 54,317,182 57,0D,724 09,665,410 62,679,661 96.023.665 9324,6"4 72,791,060 70,4Dtl4S 00,252.177 64,264.76S 66.476.025 2,690t,92 97,547*S3 102,424.374 107,545,5" 112,62m.o72 116.54.016 124,407.466 130,722,40 137'6,457 144,121.0 151,22t.449 25.0.7.317 26,962,204 26,331,314 29,747,80 31,M3ti274 32,767,037 34,416,149 3s,iss,7M 37,66,670 41,656,254 43,951,167 46,140,725 46,456,161 50,976,670 53422.916 56,064.064 61,6.4,706 64,9356,91 M6,162,665 7M171,411 78,929,961 62,76,480 07,020,304 61,371.321 21.341.9 22,406.731 23,529,166 24,705,826 25,940.6W 27,237.93 20,569,851 30029,643 31,531,2 33,107,002 34,7`3,297 40,242,862 42,255,0W 44,267,756 46.566,143 46,916,450 51,"I1,2m 63,n92u36 56,625,746 59,457,036 Q 429)6 05.5531.362 06,824.951 2.M,Wa~f 72,270699 75.e3,916 76.,676,14 20,40,5m 21,430,055 22,501,5 23,936,63 24,607,667 26.046,3" 27n,0,764 26.716.223 30150,36 31,661,951 33345,049 34,9070 36.062,006 38,466,296 40.406,564 42,430,043 44,551,M45 46.7M,122 4%,116,076 51,673,662 54,152,661 59,660,315 56,702,63 62,696,496 90.114,009 76.19,261 95,0,174 16,493,07 17,317,657 18,13,540 16,062,717 20,047.,3 21,046.721 2Z,102,20 23,207,317 24,327,603 20,356,067 2s,ees,37D 2s,20s,e3s 20,616,071 31,106,025 32.865,0n 34m7,m 32,00216es 37,02,274 41,677,007 43,760,5s 45,946,601 46.246,$46 so~mass"e 53,191,596 55,951,176

".5,42,735 61.575.$21 64,664717 67,667,432 9.4e.S37 9.963.069 10.461.222 10,99,263 12,110,172 12.715,661 13.351.405 14,019,"

14,719,660 15,455,860 16,226,766 17,040,229 17,W6240 16,786,652 16,726,195 20.713,505 21.746,130 22,85,526 23.677,313 25,176,179 29,434,966 2756,737 29.144,674 33.736,467 36,425.412 37,166,662 29,06e,517 41OC342 4,726,106 4,664,576 5.473,445 5,747.116 6.034.474 6.053,007 7.334,M.

7,701,667 6.066.77 8,661,110 6,915,866 6,261,449 10,320,66 10.637.048 11,e47,646 ll,vmDm 12,545,237 13,172.499 13,63,124 14,522s,6 15,246,814 160.11265 16,611,616 17,ss24m 16.535.029 16,461,761 20.434,670 21,456,13 5,42s,605 14,536.614 5,7D0,0SS 1S,263,445 S,866,037 16.m0,617 6,264,2a 16,67,946 6,59,503 17,669,345 6,626,426 16.552,12 72742,es 1.460,453 7

,92 20,454,476 6,0m,522 21.4n719 6,421,546 22,551.059 6,642,62 20.,76,612 9,2e4,n75 24,962,S43 6,746,6695 26,10067 1033,444 27,410r,64 10,7467 26,761.501 t1,2e5s6e0 30,220,5 11,646,864 21,731,60 1.44e462 23,316,196 13,064,505 34,694,09 13,717,614 367,300 14,403,705 3S20,5.a5 li,123,60 40.49,463 15,690,05S 42,52,3,2 16,674j,06 44,646,56 17,507,794 46,662,033 16,33,163 4,226,1s5 19.3OZ43 51,67,441 20,207.460 54W1,613 21,20,833 56.99404 22,344,674 86,.34,674 23,462,119 e2,Qe,40s 24.635,224 es,8e7,72s 25,e6ea96 66,266,115 72.729.421 a.0e'so1 6,521,244 9,67,20 10,467,171 11,022,030 11,573,131 1,759,377 13,397,"

14,067,213 14,770,574 15^,5,102 16,264AN6 17,04,76 17,63725 160651,411 16,793,62 20,793,661 neu,ozoe 22,914,008 24,05,706 27,662120 26244,726 30,70e,Ms 32,242310 33,664,426 365.47,147 37,324,604 32,16a,729 41,150,264 43,2077n 45,306,166 47,63,517 11,590,621 12170,362 13.417,624 14,01,715 14,762.151 15,532,06 16.306,449 17,124622 17,661,16e 1osese 16,624237 2015,446 22)46,063 24,096,464 25,301,369 2S~0,56,374 na,see,m7 20366,427 20,75266 327 t104 33,86,73 36,601,462 37,26.1$

2,260,634 43,273,934 33.9WI73 4547,5815 47.70.,301 9,064,eo 55n320,34 S7,661,063 63,093,147 326,2354 2442.567 2,564,65 2,692,90 2,627,576 2.998,95 3,117,403 3M.773 3.436,937 3,06,73 3,786,223 3,976,e64 4,177,61 4,236,4 4,09,924 4.836,115 6.077,621 5.531,617 6,506,406 55676,326

.17Z244 6,40,067 6,604,66 7,t14,44 7,502402 7,es77=2 6,271,366 6,ee4,sa 6,119,216 6.57,177 10,063,6" 10,556,633 11,6.404 1220,e2 12631,6636 13,473,2S 1.0675 32,646,66 10,122435 141,756,734 44,.7,415 0,181,461 20,97,337 65.490,110 21,341,646 61,611,647 20.406.576 46.67226 16,495007 27,712,47 9,460,637 135642,66 4.726,166 15,3,21 S420,0s 43,126,769 14,536,614 2,246,#X 6,067.661 37,913,737 1,6O0.21 7,69,670 2.326.254

.o4 06 09, 7 *:

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32,645,665 5

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ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT lWO eased on 2001 Cost Study Rate of Rehun II 7500 lEscaaon Factot 5 0000%1 Funding Curve FundIng Floor Actual Funding Year FundS Eat Cost

%Funded

%BMnd

%Floor

$Floor SInFund Edt.Cost

%Funded 1991 7,589,283 120,570,113 1992 10,494,062 126,598.819 1993 15,402,712 132,928,550 1994 20,651,178 139,574,977 1995 26,262,984 146,553,726 1996 29,965,846 142,898,646 1997 35,920,433 150,043,579 1998 42,285,281 157,545.757 1999 53,228,685 179,341.931 2000 81,125,110 188,309,027 2001 89,559,472 197,724.479 2002 77,883,429 205,714,287 2003 87,436,801 218,000,002 2004 97,660,081 226.800.002 2005 108,591,841 238,140,002 2006 120,297,613 a50.047,002 2007 132.797,462 262.549,352 2008 146,163,850 275,676,820 2009 160,448,044 289,480,661 2010 175,734,462 303,933,694 2011 192,052,862 319,130.379 2012 209,629,837 335,086,897 2013 228,204,230 351,841,242 2014 248,185,294 369,433,304 2015 269,516,373 387,904,970 2016 292,360,097 407,300218 2017 316,771,835 427,665,229 2018 342,848,523 449,046.491 2019 370,788,320 471,500,915 2020 400,615,467 495,075,961 2021 432,550,342 519,829,759 2022 466e,22,584 545,821,247 2023 50S,135,296 573,112,309 2024 542,132,723 601,767,925 2025 583,835,240 631,856,321 2026 590,980,301 629,170,979 2027 478,906,732 501,735,707 2028 416,749,858 430,882,807 2029 359,545,599 368,784,717 2030 297,888,469 303,194,371 2031 244,502,712 247,072,264 2032 215,154,417 216,366,087 2033 204,654,927 204,654,927 2034 187,727,339 187,727,339 2035 120,747,814 120,747,814 2036 76,766,800 76,766.800 2037 13,473,235 13,473,235 8.29%

8.29%

11.59%

14.80%

17.92%

20.97%

23.94%

26.84%

29.e8%

32.46%

35.18%

37.86%

40.48%

43.06%

45.60%

48.11%

50.58%

53.02%

55.43%

57.82%

60.18%

62.53%

64.88%

67.18%

69.48%

71.78%.

74.07%

78.35%

78.64%

80.92%.

83.21%

85.49%

87.79%

90.09%

92.40%

93.93%

95.45%

96.72%

97.50%

98.25%

98.96%

99.44%

100.00%

80%

5.04%

8,071,428 80%

6.63%

8,395,249 80%

9.27%

12,322,170 80%

11.84%

16,520.943 80%

14.34%

21,010.388 80, 16.78%

23,972,677 80%

19.15%

28,736,348 80%

21.47%

33,828,225 80%

23.74%

42,582,948 80%

25.97%

48,900,088 60%

28.14%

55,647,577 80%

30.29%

62,306,743 80%

32.38%

69,949;441 80%

34.45%

78,128,065 80%

36.48%

86,873,473 81%

38.97%

97,441,086 82%

41.48% 108,893,919 83%

44.01% 121,315,995 84%

48.56% 134,776,357 85%

49.15% 149,374,293 86%

51.75% 185,185,289 87%

54.40% 182,290,958 88%

57.08% 200,819,722 89%

59.79% 220,884.912 90%

62.53% 242,564,736 91%

65.32% 286,047,688 92%

68.14% 291,429.904 93%

71.01% 318,849,126 94%

73.92% 348,541,020 95%

76.87% 380,584,694 96%

79.88% 415,248,329 97%

82.93% 452,823.906 98%

86.03% 493,072.590 99%

89.19% 536,711,396 100%

92.40% 583,835,240 100%

93.93% 590,980,301 100%

95.45% 478,9s0,732 100%

96.72% 418,749,658 100%

97.50% 359,545,599 100%

98.25% 297,888,469 100%

98.96% 244,502.712 100%

99.44% 215,154,417 100%

100.00% 204,654,927 100%

100.00% 187,727,339 100%

100.00% 120,747,814 100%

100.00%

76,76e,800 100%

100.00%

13,473,235 7,786,931 120,570,113 8.40%

10,625,997 126,598.619 8.39%

14,545,580 132,928,550 10.94%

18,150,013 139,574,977 13.00%

25,307,510 146,553,726 17.27%

31,299,677 142,898,646 21.90%

40,007,265 150,043,579 2e.68%

49,309,948 157,545,757 31.30%

57,744,504 179,341,931 32.20%

63,153,205 188,309,027 33.54%

67,204,619 197,724,479 33.99%

70,594,925 205,714,287 34.32%

81,381,233 216,000,002 37.88%

89,653,081 226,800,002 39.53%

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT TWO U1) r-U-0 120%

100%

80%

60%

40%

20%

0%

I 9

9 I

1 1

2 2

9 9

0 0

0 C

9 9

0 0

1 1

1 2

5 9

3 7

1 5

9 2

Year Funding Curve ---

Funding Floor

ActualFunding I

I t

I 2

0 2

7 2

0 3

I 2

0 3

5 MIc.

W=EXC0mECO0D

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE Based on 2001 Cost Study Rate of Retu 6.7500% Annual Period Rate of Return 1.6875% Quarter Period Rate of Return 5.0000% Annual Escalation First Quarter Second Quarter Third Quarter Fourth Quarter Contrib Contuib Contrib Contrib Quarter Earnings Quarter Earnings Quarter Earnings Quarter Earnings ANNUAL Year Contrib Earnings to Date Contrib Earnings to Date Contnb Earnings to Date Contrib Earnings to Date CONTRIBS 2004 2005 1,432,921 2006 1.432,921 2007 1,432.921 2008 1,432,921 2009 1,432,921 2010 1,432,921 2011 1,432,921 2012 1.432,921 2013 1,432,921 2014 1,432,921 2015 1,432,921 2016 1,432,921 2017 1,432,921 2018 1,432.921 2019 1,432,921 2020 1,432,921 2021 1,432,921 2022 1,432,921 2023 1,432,921 2024 1.432,921 2025 1,432,921 2026 1.432,921 2027 0

2028 0

2029 0

2030 0

2031 0

2032 0

2033 0

2034 0

2035 0

2036 0

2037 0

1,356,984 1,550,123 1,758,633 1,977,439 2,213,531 2,465,967 2,735,879 3,024,478 3,333.052 3,662,991 4,015,770 4,392,971 4,798,285 5,227,520 5,688.609 6,181,617 6,708,758 7,272,387 7,875,037 8,519,407 9.208,386 9.651,866 0

0 0

83,203,747 94,842,173 107,286,304 120,591,915 134,818,846 150,030,263 166,294,949 183,685,604 202,280,179 222,162,018

.243,420,231 298,150,108 290,453,528 318,439,419 344,224,261 373,932,588 405,897,561 439,661,556 475,978,807 514,806,086 556,323,435 583,047,221 0

0 0

1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 0

0 0

1,404,083 1,600,482 1,810,456 2,034,989 2,275,085 2,531,761 2,806,227 3,099,895 3,413,478

.3,748,984 4,107,716 4,491,283 4,901,403 5,339,915 5,808,784 6,310,112 6,846,146 7.419,289 8,032,109 8,687,353 9,387,958 9,838,922 0

0 0

86,040,731 97,875,556 110,529,681 124,059,824 138,526,631 153,994,945 170,534,097 188,218,220 207,126,578 227,343,921 248,980,869 272,074,312 296,787,851 323,212,255 351,485,9s6 381,675,622 413,976,628 448,513,766 485,441,838 524,926,360 587,144,314 594,319.064 0

0 0

0

.0 0

0 0

0 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 1,432,921 0

0 0

1,451,937 1,851,650 1,865,188 2,093,510 2,337,637 2,598,665 2,877,763 3,176,182 3,495,261 3,836,429 4,201,215 4,591,254 5,008,295 5,454,207 5,930,988 6,440,776 6,985,856 7,568,670 8,191,831 8,858,132 9,570,560 10,029,134 0

0 0

88,925,589 100,980,127 113,827,790 127,588,255 142,297,189 158,026,530 174,844,781 192,827,323 212,054,760 232,613,271 254,595,004 278,098,487 303,229,067 330,099,383 358,829,875 389,549.319 422,395,405 457,515,357 495,066,588 535,217,413 578,147,795 605,781,119 0

0 0

80,413,842 1,432,921 1,500,619 91,859,130 1,432,921 1,703,702 104,096.750 1,432,921 1,920,844 117,181,555 1,432,921 2,153,018 131,172,194 1,432,921 2,401,265 146,131,375 1,432,921 2,666,698 162,126,149 1,432,921 2,950,508 179,228,208 1,432,921 3,253,961 197,514,205 1,432,921 3,578,424 217,086,105 1,432,921 3,925,349 237,971,541 1,432,921 4,298,291 260,324,216 1,432,921 4,692,912 284,224,320 1,432,921 5,116,990 309,778,978 1,432,921 5,570,427 337,102,731 1,432,921 6,055,254 366,318,050 1,432,921 6,573,645 397,555,885 1,432,921 7,127,922 430,956,248 1,432,921 7,720,572 460,668,849 1,432,921 8,384,249 604,853,758 1,432,921 9,031,794 545,682,128 (15,941,605) 9,756,244 571,982,434 (21,056,546) 10,222,556 594,947,129 (78,284,765) 40,158,931 556,841,295 (108,331,772) 37,588,787 486,098,311 (121,370,903) 32,811,501 397,536,909 (94,002,988) 26,833,741 330,367,663 (85,115,108) 22,299,817 267,552,375 (77,183,325) 18,059,785 208,428,835 (45,373,645) 14,088,948 177,124,136 (51,368,047) 11,955,879 137,711,968 (60,303,586) 0 77,408,382 (63,935,147) 0 13,473,235 (13,473,235) 0 (0) 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5.731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,e64 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 5,731,684 0

0 0

0 0o F.ENAE:EXCELECOA&VAM8O EVI 22140

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE ESTIMATED ANNUAL COSTS 2nf Tug 6'V 1t060 PW otiwo Yew WV Oat OImI PV Umb a

10 tt 12 13 14 20et 0

20n2 1

2001 2

20W4 5

2005 4

2006 5

2007 6

2008 7

200f 6

2010 9

2011 10 NOi i1 2fis 12 2014 13 2015 14 2016 1s 2017 16 2016 17 2019 16 2020 16 2021 20 2022 21 2023 22 2024 23 2025 24 17.374,626 26M 25 l4869,467 2027 26 76264,766 2026 27 10t.331,772 2026 29 121.37D.M 2030 26 94.002,5 mt 30 an.115.106 2032 31 77.13,325 2M3S 32 46,375,645 2034 n

61,366,047 2036 34 e0.303.6te 2036 35 1,63n,147 2037 36 13,473235 636.666.61I 194.742.233 206.679,34S 21t.113.312 230eM.9?

241,572,420 253,651,040 2ee,333.nP 2 n.685 2 f 203n63764 306,314,434 323,720,155 33,oie,ess 6.91 2,4o 374.766.121 3n,.49.027 413.170.626 433,629,370 476.266.66 5e2211,725 627 322 3 11 56.666.420 61.372tU 610,441.460 640,663,664 664,76.,490 636 29 74 614.6s9.Qe 531,06740 431,ee.630 353612,624 262237.14 21S.3.773 179429.794 133,414,324 7e,766,fl 13,47236 5S3726 6.641202 s.65eU7

,73,202 6.63,460 7,32tA 25 6,26453 7.668.021 6,64,276 6,072.423 6.676.660

,476.044 7,21t4474 6,6,6s946 7,500,440 6,344,36 7,9506471 6.812.060 3.357,444 10,302,664 6,775,316 10,e17,e16 6214,062 11, 68,306 6,674,766 11,62.646 10tt1,526 12,522O77 10t,66,462 13.146,120 11.196,774 13,.06,562 11.759,763 14,4968J11 12347,761 151221757 12.366.130 16,962.44 13,613.,30 16,761,37 14.2M4.06 17,621.06 15i0m.n7 16,oN2140 15,756,207 16,427,247 16,647,166 203,n3 6,1 17,374.526 21,4186540 22,4et,467 2,OI1,240 23,1soi 24,267.M92 25,460.7M2 26,764.300 26,09t540 20,497.167 30.972.025 32,620.626 34.14e.618 36,653,961 37,A4,690 39.526.025 41,506,476 43,560.790 46,7s,767 48,047t77 50,4s0.105 52.72.74 55,s2s,307 36.402,373 61,322,4s1 64,366616 67,eme,047 70,366,446 74,537,87I 7e,2e4,7es 26,016,463 30,.80,645 30.467.307 32,506.6 31,0.673 34,134.42 33503206 25,541,164 35,266,716 37.633,222 37,033202 36,514,683 36,664.662 41,490,627 40,326,105 43,565,166 42.3M7,561 45,743,417 46,014,0 46,030.544 47264,763 50,432,117 49,626.033 52,53,723 52.109435 s5,e.640e

£4,714,306 56e361,479 s7,450,e52 6t,300.M63 60,323,104 64,30.581 63,n33,343 67.63.Me

,5o.311 70,363,063 6e,831.626 74611,20 73,323,207 76,236,7e6 76,96.366 6S,146,604

o,m.m 6e,25,035 04,3.m 6o,5ee3e6 66,124,617 65.067276 93,561,.0 66,3,142 6,260.111 104,544,746 1o03173.116 11 0, 697 10e,331.m 115,561,336 121,370,303 22,637,66 19.893.716 23,76,564 20m.,4c2 25.17 6.42 21.712,322 26,437,466 22,797,936 27,759,343 23,337,635 29,147,310 25.134,727 30,604,675 20.361,463 32,134,909 2.711.036 33,741,656 2n.oe s 35,426,737 30,551,417 37,200.174 3Z,076,666 36,060,163 33.ne2.63n 41,013,162 35.367,064 43.0e3,s52 37,136,439 45,217,t44 36,662211 47,477.807 40,641,62t 49,e61,7i1 42J,9t12 2344a,361 45,13,353 e4,01,60o 47.36276 67.700690 46,765,039 e0o656.164 62,253,26 63,624,22 64,365,356 66e,60e,16 57, 6,264 70146,477 60,466.717 73,03,09 M3,514202 77,336,46r1 eee,12 31,20331s 70.024.406 66 23,461 73,52.,6 696 2,0 6 77,2 01,10 64,002,9e e61,o2,00s 6,116,106 17,006077 6,233 10,267.062 11,47n,077 1I.5s0.o21 2.32624 17,05e41 6,9.513 l0D,76,415 t2.053t03t 170.362 2,442567 16,751.406 10,496,43e l1.31S,430 12,666,662 12,77,60 2,X54,es 16,66,676 11.022.30 11.05.40 13,266,467 13,417,624 2X6Xno 20,6n,424 11,674,526 12,476.676 1362,e90 14.,715 227,.S76 21,707,S6 12,153255 13I03.62 14.6,534 14,n3,l5l 2X9te5 22762460 12,X76,17 13,756845 15,38301 1S6S32,30 X117.403 23,n32.072 13,396,63 14,446,767 16,152,214 16,30,446 32nm73 20,126.576 146.Me 11 16,166,127 16.6,25 t7t124,9n 3,436,637 20,385.110 14,772m3s7 15,n27,663 177.6716 17,41,166 3.6047 27,704,66, 15,S51,675 6,M362 1WO96N,7 15,60226 3,75s23 26,6,8 16,26.524 17,60,160 WII7 16,824,237 3.67,64 30,544.053 17,100,650 16,438,16 20,e14.m 20,f16,449 4.17708 32,o7126 17.es582 19,380,077 21,645,612 21,em 4,39e,496 33,074.829 16,353.687 20,326.660 2Xn2r7.7a 2X246,o03 4056.324 3s,356,571 1.76.371 21,344,485 23.64,177 24,66,464 4.6.116 37126,490 203.706,t 22,41i,70 25,057,365 25,3.309 5.077,21 36,362,324 21.,49S 23.532.294 26.310,2 26,56,374 5.331,tT 40,31,3es 22,316,774 24,706,609 27,25,767 27*694.63 55ss.40e 42,676,666 24,02,613 25.a44.6 26.07wY.

2,26.427 5.M,326 45,127,462 20,266,743 27,241,5n 30,457,406 39.M.W

172n244 47,33,66 20.52s,031 28.t 061 31,360,2e6 3n2om 1,4 6,4s0,367 46,753,060 27,35,462 30,031.M33 an,2n ss,06,173 6,604,396 62,240J713 262462N 31,S535525 3S256,256 36,501,462 7,146,144 u4.e2,7w4 30J710,e6e 33,11210 37,021,171 37,36,556 7,50402 7A, 36 32M2M203 34.767616 3P72 36250e34 7,77,52 60,476,156 33,658,513 3e,506,312 40,15.1641 4121X3,1 61,396 63.496.613 35,551,436 3,331,26 42,656,33 43,273,24 6,6s4,6es e,67,3 37,326,010 40,248206 44,s6,4e4 45.437,515 6,116,216 70,007s"t 36,165,461 42260,613 47,246,437 47,709,361

.575,1m7 73,502 41,156,234 44,373 4,611e,903 6004,60 I00o3,936 77,t13,325 4321tX8 46,51333 62062606 52,5e03 10,56,63 45,373,645 48.321.646 54,667,130 5522,5a4 11,064,464 61,3.047 57,431,67

7, t91,o03 11,536,667 60.303,586 60,360,616 12*0,6n 63,935,147 12,631,653 13,473235 16,547,307 6,397,26 22,48,47

,64122 73,315,336 22.011,240 65,064,675 26,016,463 6,7r72s16 30,360,646 72,3,591 22.t 6937.6 61,36,36 1e,693716 S1517,430 17,006,077 6722,313 6522,n3 30.461,409 10267,062 356,70211 11,479,077 37.13,737 11,560,61 7.3.670 2,326,2S4 35,363.n 74t n1

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE Based on 2001 Cost Study Rate of Return

.7500%

Emcalton Faco 5O0000%

Funding Curve Funding Floor Actual Funding Year Fund $

Est. Cost

% Funded

% Band

% Flor

$ Floor

$ In Fund Est. Cost

% Funded i 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2038 2037 8.006.475 127.342,404 6.29%

10,665,274 133.709,524 7.98%

15,618,562 140,395,000 11.12%

20,914,758 147,414,750 14.19%

28.577.594 154,785,488 17.17%

32,399,151 161.350,352 20.08%

38,830,576 169,417,870 22.92%

45,699,623 177,888,784 25.69%

54,784,199 192.831.688 28.40%

82.867.951 202,473,273 31.05%

71,538,869 212,596,936 33.65%

75,541,923 208,879,345 36.20%

84.818,763 219,113,312 38.71%

94,719,398 230,068,977 41.17%

105,325,578 241,572.428 43.60%

116,654.117 253,651,048 45.99%

128,772,296 26e.333,600 48.35%

141,726,762 279.650,280 50.68%

155,566,654 293,632,794 52.98%

170,374,556 308.314,434 55.26%

186.209,585 323,730,155 57.52%

203.134,198 339,916,663 59.76%

221.250,057 356,912,496 61.99%

240,594,714 374,758,121 64.20%

261,281,362 393,496,027 68.40%

283,435,188 413,170,829 68.60%

307,084,428 433,829,370 70.78%

332.393,556 455,520,839 72.97%

359,440,108 478.296,880 75.15%

388,360,327 502,211,725 77.33%

419,273,969 527,322,311 79.51%

452,363,444 553.688.426 81.70%/9 487,713,862 581.372,848 83.89%

525,468,035 610,441,490 86.08%

565,906,731 640,963,564 88.29%

592,630,961 654.768,490 90.51%

810,914,315 663,892,974 92.02%

574,940,495 614,909,620 93.50%

505,417,785 531,906,740 95.02%

415,242,631 431,062,630 96.33%

344,073,853 353,912,624 97.22%

276,536,199 282,237,394 97.98%

212,550,846 215.306,773 98.72%

171,287.833 178,429,784 99.36%

133,414,824 133,414,824 100.00%

76,766,800 76,766,800 100.00%

13,473,235 13,473,235 100.00%

80.00%

5.03%

80.00%

6.38%

80.00%

8.90%

80.00%

11.35%

80.00%

13.74%

80.00%

16.06%

80.00%

18.34%

80.00%

20.55%

80.00%

22.72%

80.00%

24.84%

80.00%

26.92%

80.00%

28.96%

80.00%

30.97%

80.00%

32.94%

80.00%

34.88%

80.00%

36.79%

81.00%

39.16%

82.00%

41.56%

83.00%

43.97%

84.00%

46.42%

85.00%

48.89%

86.00%

51.39%

87.00%

53.93%

88.00%

56.50%

89.00%

59.10%

90.00%

61.74%

91.00%

64.41%

92.00%

67.13%

93.00%

69.89%

94.00%

72.69%

95.00%

75.53%

96.00%

78.43%

97.00%

81.37%

98.00%

84.36%

99.00%

87.41%

100.00%

90.51%

100.00%

92.02%

100.00%

93.50%

100.00%

95.02%

100.00%

96.33%

100.00%

97.22%

100.00%

97.98%

100.00%

98.72%

100.00%

99.36%

100.00%

8,405,180 8,532,219 12,494,850 16,731,805 21,262,075 25,919,321 31.064,461 36,559,699 43,811,380 50,294,381 57,231,095 60,433,538 67,855,010 75,775,518 84,280,462 93,323,293 104,305,559 116,215,945 129,120,323 143,114,827 158,278,148 174,695,410 192,487,549 211,723,348 232,540,412 255,091,670 279,428,630 305,802,071 334,279,298 365,058,707 398,310,271 434,288,906 473,082,271 514,958,674 560,247,664 592,630,981 610,914,315 574,940,495 505,417,785 415,242,631 344,073,853 276,536,199 212,550,848 177,287.833 133,414,824 76,768,800 13,473,235 8,425,913 127,342,404 10,625,686 133,709,524 14,358,300 140,395,000 17,548,946 147,414,750 23,923,294 154,785,488 29,189,706 161,350,352 36,502,075 169,417,870 44,699,986 177,888,784 52,706,435 192,831,688 56,260,185 202,473,273 59,074.016 212,596,936 61,165,704 208,679,345 72,048,542 219,113,312 80,413,842 230.068,977 6.62%

7.95%

10.23%

11.90%

15.46%

18.09%

21.55%

25.13%

27.33%

27.79%

29.31%

32.88%

34.95%

RFNAW: W-EXCRMCWO VAFSR02EXH[WT 2tloo5

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT UNIT THREE 120%

100%

0'a C

IL.

80%

60%

40%

2004 Funding Status S Amount Percent Actual 80.414 34.95%

-Committed 94,719 41.17%

Floor 75,776 32.94%

sjhjj Xiijjl-lll-20%

0%

1 9

9 I

1 1

2 2

9 9

0 0

9 9

0 0

1 1

1 2

2 3

5 9

3 7

1 5

9 3

7 1

Funding Curve -h-Funding Floor

Actual Funding I 2

0 3

5

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR OECOMMISSIONING FUNDING REQUIREMENT ALL UNITS Based on 2001 Cost Sbdy.

Reat of Reiu 6.7500% Aal Period Raet of Retun 1.0875% Quaeter Period Rate of Retun 5.0000% AmvuA Escolkon Frd Quarter Send Quarter Thrd Quarter Fourth Quester Conbb Conbbit Cordt Canrbb Qartbo Ewrq Quan er Esn*m Oubri Em~

Ouarbr Ewrv ANNUAL Yew r oe

~

l Cnb EsConbibi

.EE n*t Contrb EW B

t bDow CONTRIBS 2003 2004 2005 4,069,548 4.260.024 2006 4,069.548 4,83s.663 2007 4,069,548 5.453.221 2008 4,069,540 6.112.482 2009 4.069,548 6.017.341 2010 4,069.548 7,571,018 2011 4.069.548 8,37,870 2012 4,069,548 9,236.809 2013 4.069,548 10,189.798 2014 4.069,u5 11,144.866 2015 4.0s,9548 12.198,127 2016 4,089.548 13,324.304 2017 4.089.546 14,528,444 2018 4.089.548 15,815,944 2019 4.089,548 17.192.575 2020 4,069,548 18,664.472 2021 4,0698s48 20,232,505 2022 4,069.548 21,906,813 2023 4,069,548 U

23,700.455 2024 4,069,548 25,530.337 2025 2.742,868 18,665,374 2026 1,432,921 9,651,888 2027 0

0 2028 0

0 2029 0

0 2030 0

0 2031 0

0 2032 0

0 2033 0

0 2034 0

0 2035 0

0 2036 0

0 2037 0

0 280.775.429 295.523.2u4 332.876,597 372,401.988 414,877.465 4e0293.471 W08.853,510 560.775,258 616,291,440 675,650.890 739.119.870 606,982.261 879,542.834 957.126.625 1.040,081.378 1.128,778,778 1.223,265,310 1.324,278.410 1.432,241,409 1.542.870.293 1.650.501,988 1.656,212,260 0

0 0

00 0

0 0

4.069.548 4.400,585 4.069,548 4,986,955 4,069.548 5.813,918 4,069,548 8,284,284 4.069,548 7,001,058 4,069,548 7.767,452 4,069,546 8,586,903 4.069.548 9,463,062 4.069.548 10,399,918 4,069.548 11,401,609 4,069,548 12.472,844 4,069,548 13,617,828 4,069.546 14.842.285 4,069.548 18.151.512 4.069.546 17.551,373 4.069,548 19.048,108 4,069.548 20,642,602 4,069,548 22,347,198 4.069.546 24,189,074 4.0s.u548 26.035,936 2.742,s66 19,028.638 1,432,921 9,838,922 0

0 0

0 269,245,563 304,579,757 342,36Q,003 382,755,820 425,948,091 472.130.472 521,509,961 574,307,869 830,780,906 891,122,047 755,881,863 824,s69.635 898,454.u6 977,347.85 1,061,702,300 1,151,894,435 1,247,977,461 1,350,695.157 1,460,480.031 1,572.975,778 1,872,271.492 1.67,4u4.103 0

0 0

4.069.548 4,543.519 4,069,548 5,139,783 4,069,50 5,777,326 4,09,u548 8.459.004 4,089,548 7,187,874 4,069,548 7,967,202 4.089,548 8.800.481 4,069.546 9,891,448 4,069.,5S 10,644,0W9 4.089,548 11,862,565 4.069.548 12,751,794 4.089,548 13,918.300 4,069,548 15.161.423 4,069,548 16,492,742 4,069.548 17,916,226 4,069.s40 19.430,219 4,069.548 21,059,820 4.069,545 22,792,981 4,069,548 24.645,601 4,069.548 28,543,966 2,742.60 19.393,9N 1,432,921 10,029,134 0

0 0

0 277,650,630 4,069,546 313,789,089 4,069,548 352,206,937 4,069.546 393,264.373 4,069,548 437.205,513 4,069.548 484,187,222 4,09.u548 534,379,990 4,069,548 588,068,863 4,069.548 645,474.545 4.06,9546 706,s54,280 4,09,u548 772.483,206 4,069.546 842,855,483 4,069.547 917,565,839 4,069.548 997,909,976 4,069.5u4 1.083,688.074 4.067.447 1,175,402,201 3,726.143 1.273,106.829 3,709,745 1.377,557,686 3,687,434 1.489,195.1w0 (1.060,941) 1,603,589.292 (1,556,113) 1,694,408,356 (104,38077m3) 1,678,946,158 (272,056226) 0 (251.854.441) 0 (273,839,496) 0 (290.447,147) 0 (223,380,488) 0 (148,414,403) 0 (115,465,314) 0 (97.072.950) 0 (162.301.015) 0 (152.860,196) 0 (191,805,440) 0 (40,419,706) 4,U8,864 5,295,191 5,943,492 6,636,674 7.377.643 8,170,322 9,017,682 9,923,682 10,892,383 11.928,188 13,035,654 14,219,811 15,485,945 16,839,731 18,287,238 19,834,912 21,483,674 23,24,268 25,130,169 27.060,5s9 55,069,891 62,81,197 100,544,701 90,331,294 77.957,990 63.614,972 52,830,801 32.663.60 28,210,204 11,955,879 0

0 0

252,445.857 286,617,043 323,153,828 362,219,978 403,990,595 448,652,905 496,407,092 547,487, 602.062,094 66,434,476 722,851,995 789,588,408 860,944,642 937,241,133 1,018,819,255 1,106,042,758 1,1,983,257 1,29,300,048 1.404,471.405 1.513,2U64408 1,829.093,748 1,045,127A473 1,489,551,129 1,338,241.390 1.154,933,188 942,444.031 782,678,535 667,094,933 604,293225 535,430.478 385,085.342 232,225.148 40,419,706 (0) 18,278,193 16,278,193 18,278,193 16,278,193 18,278,193 18,278,193 16,278,193 16,278,193 18,278.193 18,278,193 16,278,193 16,278,192 16,278,193 18,278.193 16,278.193 18,278,193 16,278.193 18.278.193 18,278,193 16,278,193 10,971.464 5,731,684 0

0 0

0

0

.0 0

0 0

0 PLEAMUO WSA5OLCCLWNO010018f

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT ALL UNITS ESTIMATED ANNUAL COSTS nu T." f PV.

acc' I-PVbal 1-v4.

2 3

4 a

a 1

II

'a Is 14 14 I

4t IT 17 at 20.612 073 4116232 14.220 1L471.767 170.Nuo 18686251 320.20"11 13.1 2 170.2.8651 221.864.73 70.02.726 220.SKS14 72.32.02 7110.10 2401.402*

02.614.72 K20,7.44 B7.774.M0 30.6018 I1&SO2wm 34.77144 24.M4)12 4117670 I.771012.1411

..7.I16 amu am 2WSl 2o4 244 aM 2016 2012 2010 21T ml Ml 2: 0

.u 362 232

-07 I.I 24.8 SAM8 6*11 0.1218 273.4611 186,414.48 II&O6*2 W02.0728 101.M&44

.,416.72 2.2411.104.9 1 2210.

44861220 60S.86147 M2.4 4

786,c62.48 1,6$k*64.

I1.21,02.201.14 I1.6*17.43R4

14418626

1227.301*864 7 *7412.341 I 1.21.2110

W102.601 7 1oz^000 671 l4626 5 10220*8 4 0160.86 672 I17 M6 1.0"1 I.m6 1.114 1.170 un2 1.286 1.364 1.023 1,44 4.286 1.86 1.726 1.615 2."f1 12186 10266 1864 10.310 112.110 191.221 210.76 211021 221.28 2312.4 244.861 2611.86 343.406 142386 la,=

1"10.

Wm.4 171.07 IS1.720 121611 211.022 221706 "mm 302670) 260*0 144220 101*02 ratio0 U7147 110.441 106213 10.424 210.200 32110 241860 286*6 27210 221770 347.263 4mml

'.741-N 2.131,24 32221410 1.444418 2.86786 2.4"A6I

."ki67 1.20718 1477*1 IL3*0102

-."&140 4.m1.677 4,22144 2.1310.28 12286020 21641.041

%1.3614 1.4070686 1.026.202 41672864 4.46200 320121201 24A.86108 asoo,867 11441444i 4124166 42.26044 44.486016 41724.44 86086*23 51*511kfl7 sumoss8 1178686 W461430 00.74223 86*62*10 71.40123 70.1864w 23*14,1121 41610,68 61141201 02.011.02 9t.137*66 4,"4.6a0 1W.863,4 21186861 14107.810 W11.,4121 M2.22144 12112144 1GL10.646 204,861*112 214.260,4 4486110 3at60.710 2486 421 271.6147 7W,334,314 07,1101441 602144t~3 224.6217742 I27.6444

?lp2o1.

1111.1201111 lft.261441 t".4al 14101741142 11126144 1860386W 3102621.6 17.6400 "212t,"

104.4114 38186.4 27,41786 611a.86 22,26.4 41106.4 22168661 21., *4,6 71.721,702 Z41741867 4186301360 2120644l 121237.186 61286.4 6144.44 21620.44 asass86 osis41714 07.6*18 102,331.1 14.40AU2 113.2AM"14 twoo4*13 124,6*44 11114,764AM 12170442 112,964.447 6*0211t023 21.702.203 212*21866 34.326.186 316W7233 41.1794112 S02.,130,41 111,277 217 41,20.44o 71,3*66 24,44.44 01116.113*8 14186.710 122?4.106 1X2011662 t1d.914J31 lud4".67 21864.407 2471.443 34.7117*27 4.57.11.7141 214.11*1 61.2301265 41286004 4711.73213 li.0631744 WM27AN2 Slick604 22.44144 4164104 24.702,44 "Okay2 27*6M.4 2&44*11 31021107 31.024.10 41114.3711 24.602.64 41323*14

$1.47*60 So,86386 8622104 46.74.1186 41867.02 177027210 11.64,11016 O4144.4 KAMM.4 32.43I.SIS 2644.44t 41,0.6*70 47*27*1 41.611F2 21402' 86 64224.023 07.4n.434 74.201*6 7l44.44 01*11.861 81071.44 60.6*44.2 121et.11*1*

141201710 14721144n 10402.20 1431.21011 37.821.121 46022347 41.6*014 4711.814411 4211.84.4 A4181200 U&.31.86 4114.0077

10. 37,e10 182.44~d 416*086 1311.I8.To6 12186144 U&MR1.12 24.7 72,48 321511.44 40.263,472 443132.453 0121,374.7 110614488 02.247171 216744~

w"7184so2 02el.74766 1617ll02 10411864,44 MO8214444 4.070.702 7.327.7O6 1,864.441 fi3s24,16 30.*1KM1 10.374.610 211.7XISS 4128.44~

14.442.0711

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT ALL UNITS Based on iW I Cost StudyI Rate of Return

.7500%l lEsclton F scoooox Funding Curve Funding Floor Actual Funding I Yeer Fund S Est. Cost

% Funded

% Band % Fbor S Fbor S In Fund Eat. Cost

% Fwtddl 1991 23,954,557 1992 32,291,558 1993 47.350,399 1994 63,451,735 1995 0,667,731 1996 92.446,522 1997 110.817.863 1998 130.438,989 199 160,687,664 2000 184,510,511 2001 209,957.2e6 2002 227,671,280 2003 255,608,816 2004 285,481.755 2005 317,428.525 2006 351,S0.985 2007 388,130,883 2008 427.211.135 2009 488.948,229 2010 513,612,943 2011 581.3236683 2012 612.358.661 2013 688,955,578 2014 725,335,597 2015 787,698,322 2016 854.446,718 2017 925,732,046 2018 1,002,051,525 2019 1.83601.687 2020 1,170.795,620 2021 1.263,741,298 2022 1,363.038,042 2023 1.469.229.607 2024 1,577.918,423 2025 1.688680,005 2026 1,699,231,949 2027 1.533.534.785 2028 1,376,475,110 2029 1.183.037,714 2030 955,944,470 2031 780,427,43 2032 669,729.795 2033 588,4s0,266 2034 515,629,454 2035 372,193,909 2038 230.300,399 2037 40.419,706 370,450,982 6.47%

388.963.531 8.30%

408,422,206 11.59%

428,843,317 14.60%

450,285.4s4 17.91%

441.921,684 20.92%

464.017.979 23.88%

487,218,877 28.77%

542,542.127 29.62%

569,669,233 32.39%

598,152.695

.35.10%

802,598.238 37.78%

632.726,050 40.40%

ee4,382,352 42.97%

897,5s0.470 45.50%

732.459,493 48.00%

789,082,468 50.47%

807,536,592 52.90%

847,913,421 55.31%

890,309,092 57.69%

934,824,547 80.05%

981.5e,774 62.39%

1,030,644,3 64.71%

1,082,176,28 67.03%

1.138,285.079 69.32%

1,193,099,333 71.62%

1,252,754.300 73.90%

1.315.392.015 76.18%

1,381,161,816 78.46%

1.450,217.490 80.73%

1,522,387,790 83.01%

1,598,108,380 85.29%

1,877,591,585 87.58%

1.750.084.151 09.85%

1,837,981,413 91.88%

1,817.432.163 93.50%

1,621,140,167 94.60%

1.437.750.013 95.74%

1,222,310,042 96.79%

978.482,341 97.70%

792.835,9e8 98-43%

076.842,641 98.90%

589,238,193 99.53%

516.771.404 99.78%

372,193,909 100.00%

230.300.399 100.00%

40.419.70e 100.00%

80%

5.17%

80%

6.64%

80%

9.27%

80%

11.84%

80%

14.33%

60%

18.74%

60%

49.11%

80%

21.42%

80%

23.e9%

80%

25.91%

80%

28.08%

80%

30.23%

80%

32.32%

80%

34.38%

80%

30.55%

81%

38.88%

82%

4138%

83%

43.91%

84%

46.45%

85%

49.03%

se%

51.84%

87%

54.27%

88%

58.94%

89%

59.85%

90%

62.39%

91%

65.17%

92%

67.98%

93%

70.84%

94%

73.74%

95%

78.69%

96%

79.69%

97%

82.73%

98%

85.82%

99%

88.95%

100%

91.57%

100%

93.50%

100%

94.60%

100%

95.74%

100%

96.79%

100%

97.70%

100%

98A3%

100%

98.ss%

100%

99.53%

100%

9.78s 100% 100.00%

100% 100.00%

100%

100.00%

19,163,629 25,833,244 37,880,319 50,781,389 84,534,186 73.957,218 88.654,290 104,351,191 128,550,291 147,608,409 167,ss5.630 182.137,024 204e488,893 228385,404 254,976.311 284,781,853 318,245s212 354.581,180 393.890,181 438,542,295 482.706,8se s32.717,639 586,883,421 u45.508,291 706.884.682 777,498,675 851,821,800 931,852,077 1.018,524,898 1,112.190.434 1,213,118,076 1,322,083,786 1,439,751,882 1,581,987,735 1.883,020,937 1.699,231.949 1.533,534,785 1,376.475,110 1,183,037,714 955.944,470 780,427.843 869,729,795 56,4o0,268 515,629.454 372,193,909 230,300,399 40,419,706

^

_ j

= A

_A A

l 24,744,180 32,411,009 43,378,398 53,460,728 73.899.985 90,981,013 118.001,259 143,981,975 171,08,062 182,205.845 190,688.572 195.104,188 228.012,228 252.445,857 370,450,982 6.68%

388,963.531 8.33%

406,422,208 10.62%

428,843,317 12A7%

450.285,484 16.37%

441.921.884 20.59%

464,017,979 25.00%

467,218.877 29.55%

542,542,127 31.53%

5s9,6s9,233 31.98%

598.152.895 31.88%

602,s59,23a 32.38%

632,726.050 38.04%

884,362,352 38.00%

nRE5:0i W

arari

ARIZONA PUBLIC SERVICE COMPANY NUCLEAR DECOMMISSIONING FUNDING REQUIREMENT AUL UNITS 120%

100%

a)

V U-80%

60%

40%

2004 Funding Status Actual 252,440 38.00%

Committed 285,482 42.97%

Floow 228,385 34.38%

20%

0%

I 9

9

.I 1

9 9

4 1

9 9

7 2

0 0 0 0

2 0

0a 2

0 0

6 2

0 0

9 2

0 1

2 2

0 I

5 2

0 I

8 2

0 2

1 2

0 2

4 2

0 2

7 2

0 3

0 2

0 3

3 2

0 3

6 Yeac I -+-- Fundting Curve

-*x Funding Floor

Actual Fundi~ngl FL1D0A WEUCfELA CONINAM M l41 by. wr~"am

Palo Verde Nuclear Generating Station Units 1, 2, & 3 SRP 2004 Annual Funding Status Report Appendix B, Tab 2 Section 2.1.7 [Restated]

Summary of Assumptions Investment Return Assumption:

Inflation/Escalation Assumption:

2001 Cost Study 7.65%

5.92%

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST (000's)

ALL UNITS Aggregate Decom Costs in 2001$

51.972.170 SRP Shore in 2001$

$344,933 Ending Balance as of 12/31/01 in 2001$

$120,840 SRP Share 17.49%

Projected return on investments 7.65%

Projected Inflation 5.92%

FV of Total Decom. Charges Discounted to Start of Decom

$1,402,556 FV of 12/31/01 Fund Balance value at Start of Decom S413.513 FV of Balance Owed to be Funded by Contributions and Earnings 1989043 Years To Start of Decom (Funding Yrs Left)

Unit 1 Unit 2 Unit 3 20 21 23 Current Balance Year(s)

Calender Annual Before Decom Termination Since Year End Payment Earnings Decom Charges Ending Costs Funded Stuv 31 -Dec fInfla1Ad.l1 fInflat Adi.]

Charoes (Inflat Adi.

Balance inflat Adi.1 Ratio 1987 1988 1989 1990 1991 1992 1993 1994 1995 721 2.880 2.415 2.523 5,809 3.989 5.390 6,890 5,210 26 31 283 1.185 716 1,269 899 198 9,579 747 3.658 6,356 10.064 16.589 21.857 28,147 35,234 50.024 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 747 3,658 6,356 132,884 4.78%

10,064 137,004 7.35%

16.589 145,115 11.43%

21,857 240.921 9.07%

28,147 255.184 11.03%

35.234 270.291 13.04%

50.024 286,292 17.47%

A C

T U

A L

IF 0

R E

C A

S T

0 2

3 4

5 6

7 8

9 20 I2 12 13 14 36 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 4.188 4,435 4.698 4,135 4,044 4,909 1,000 6,812 6.584 6,996 7,410 7.849 8.313 8.805 9,327 9.879 10.464 11.083 11,739 12.434 13.170 13.950 14.776 15,651 16.577 17.559 18,598 19.699 20.865 15.152 7.425 7.865 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 000 362.2i 7,961 62,172 14.228 80.834 15,598 101,132 14.468 119.735 (3.007) 120,772 (4.841) 120,840

-11.184 110,656 19.514 136,982 10,102 153.668 11.756 172.419 13,190 193,020 14.766 215.634 16,496 240,444 18,394 267.643 20,475 297,445 22,755 330.078 25.251 365,793 27,983 404.859 30,972 447,570 34,239 494.244 37,810 545.224 41,710 600.883 45.968 661.627 50,614 727.892 55,684 800,153 61,193 878,905 67,217 964,719 73,779 1,058,197 80.666 1,155,993 88,120 1,255,165 91,294 1.292,100 86,005 1.218,125 78,372 1,102.847 66,976 942.482 54,894 772.461 45,209 636,179 39.090 550,064 34,868 490,654 31,415 442.063 25,784 362.823 8,270 116,375 14.1 69.140 1AJ 483150 i4536 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.48 243.61 257.48 290.27 3,736.00 4,099 61.784 167.845 193.650 227,341 224,915 181,492 125,205 94,277 80.006 105.023 251,263 52.148 68.477 837 55 62,172 303,241 20.50%

80.834 321,193 25.17%

101,132 340,207 29.73%

119,735 360,347 33.23%

120,772 381,680 31.64%

120,840 344,933 35.03%

110,656 365.353 30.29%

136,982 386,981 35.40%.

153,668 409.891 37.49%

172,419 434,156 39.71%

193,020 459.858 41.97%

215,634 487.082 44.27%

240.444 515,917 46.61%

267.643 546.459 48.98%

297,445 578.810 51.39%

330,078 613.075 53.84%

365,793 649.369 56.33%

404,859 687.8 12 58.86%

447.570 728,531 61.43%

494,244 771.660 64.05%

545,224 817,342 66.71%

600,883 865.728 69.41%

661,627 916,980 72.15%

727,891 971,265 74.94%

799,909 1,028,764 77.75%

878,647 1,089,666 80.63%

964,429 1,154,175 83.567%

1,054.461 1,222,502 86.25%

1,151.893 1,290,775 89.24%

1,193,381 1,305,404 91.42%

1,124.255 1,214,839 92.54%

1,024,474 1,093,107 93.72%

875.506 930,478 94.09%

717,567 760,648 94.34%

590,970 624.187 94.68%

510,974 535.934 95.34%

455.786 473,384 96.28%

410.648 421.402 97.45%

337,040 341,326 98.74%

108,105 110,269 98.04%

64,227 64.649 99.35%

0Q Q

100.00%

FUNDING FLOOR ANALYSIS FOR ALL UNITS ($000's)

ESTIMATED FUNDING FUNDING FLOOR CURVE Ending Fund 92 Required Minimum Minimum Minimum Floor Y

Balance Est. Costs

% Funded

% Funded Band Percentoae S AMT Percentoae SAMT Satisfied?

1991 16.642 145.115 11.47%

80.00%

9.17%

13,314 11.43%

16.589 YES 1992 21,851 240,921 9.07%

9.07%

80.00%

7.25%

17,478 9.07%

21.857 YES 1993 28.157 255,184 11.05%

11.04%

80.00%

8.83%

22,530 11.03%

28,147 YES 1994 35.235 270.291 13.04%

13.04%

80.00%

10.43%

28.188 13.04%

35.234 YES 1995 43,140 286.292 15.07%

15.07%

80.00%

12.05%

34.512 17.47%

50.024 YES 1996 62.172 303.241 20.50%

17.13%

80.00%

13.71%

41,567 20.50%

62,172 YES 1997 80,834 321,193 25.17%

19.23%

80.00%

15.39%

49,423 25.17%

80.834 YES 1998 101,132 340.207 29.73%

21.37%

80.00%

17.09%

58.156 29.73%

101,132 YES 1999 119.735 360.347 33.23%

23.54%

80.00%

18.83%

67.851 33.23%

119,735 YES 2000 120,772 381.680 31.64%

25.74%

80.00%

20.59%

78.598 31.64%

120,772 YES 2001 120,840 344.933 35.03%

27.96%

80.00%

22.36%

77.141 35.03%

120,840 YES 2002 110,656 365.353 30.29%

30.23%

80.00%

24.18%

88.358 30.29%

110.656 YES 2003 136.982 386,981 35.40%

32.54%

80.00%

26.03%

100.748 35.40%

136.982 YES 2004 153,668 409,891 34.90%

34.89%

80.00%

27.91%

114,420 37.49%

153,668 YES 2005 172.419 434,156 37.29%

37.28%

80.00%

29.83%

129,490 39.71%

172.419 YES 12 2

3 4

5 6

7 8

9 10 211 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 193,020 459,858 39.72%

215,634 487,082 42.19%

240.444 515,917 44.70%

267,643 546.459 47.25%

297.445 578,810 49.83%

330,078 613,075 52.48%

365,793 649,369 55.15%

404,859 687.812 57.86%

447,570 728,531 60.63%

494.244 771,660 63.45%

545.224 817.342 66.29%

600,883 865.728 69.19%

661,627 916,980 72.14%

727,891 971,265 75.14%

799,909 1,028,764 78.19%

878.647 1,089,666 81.28%

964,429 1,154,175 84.42%

1,054,461 1,222,502 87.62%

1,151,893 1.290.775 90.83%

1,193,381 1,305,404 92.12%

1,124.255 1.214.839 93.20%

1,024,474 1,093,107 94.30%

875.506 930,478 95.28%

717,567 760,648 96.15%

590,970 624,187 96.84%

510.974 535,934 97.78%

455.786 473,384 98.34%

410.648 421,402 99.06%

337,040 341,326 99.31%

108,105 110.269 100.00%

64.227 64.649 100.00%

0.00 0.00 100.00%

39.71%

42.18%

44.69%

47.23%

49.82%

52.46%

55.13%

57.85%

60.62%

63.42%

66.28%

69.18%

72.13%

75.13%

78.17%

81.27%

84.41%

87.60%

90.82%

92.11%

93.16%

94.26%

95.26%

96.14%

96.83%

97.76%

98.33%

99.05%

99.30%

100.00%

1 00.00%y 80.00%

80.00%

81.00%

82.00%

83.00%

84.00%

85.00%

86.00%

87.00%

88.00%

89.00%

90.00%

91.00%

92.00%

93.00%

94.00%

95.00%

96.00%

97.00%

98.00%

99.00%

100.00%

31.77%

146,087 33.74%

164.350 36.19%

186,736 38.73%

211.653 41.35%

239,361 44.06%

270,143 46.86%

304,310 49.75%

342.203 52.74%

384,193 55.81%

430.688 58.99%

482.135 62.26%

539.022 65.64%

601.882 69.12%

671,298 72.70%

747.909 76.39%

832.411 80.19%

925.567 84.10%

1,028,125 88.10%

1,137,164 90.27%

1,178.415 92.23%

1,120,413 94.26%

1,030.414 95.26%

886,380 96.14%

731,307 96.83%

604.418 97.76%

523.955 98.33%

465.456 99.05%

417,412 99.30%

338.928 100.00%

110.269 100.00%

64.649 100.00%

0.00

1991 1

1992-1993 1994 1995 +

119967 19974-1998 1999 -

2 00 0 j+

2001 +/-

2002 4 2003 t 2004 -

2005 20061 2007+

2008 -

2009 +-

2010 2011 -

2012 2013 +/-

2014+/-

2015 -

20164 12017 J218 2019 2020 T 2021 +

12022

,2023 t 2024-2025 2026 t 2027 t 2028 4 2029 2030+

!2031+

2032 +

2033 -

2034+

2035 A-2036 +

12037-

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I 4

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST I

UNIT1 1 AR Participants Decom Costs in 2001$

$615,841 SRP Share in 2001$

$107,711 Plan Balance as of 12/31101 in 2001$

$40,624 FV of Total Decom. Charges Discounted to 2024

$403,976 FV of 12/31/01 Plan Balance in 20 years S128.334 FV of Balance Owed to be Funded by Contributions and Eamings 1275642 Current SRP Share 17.49%

Projected return on investments 7.65%

Projected Inflation 5.92%Y Years To Start of Decom (Funding Yrs Left) 20 Balance Calender Years Since Year End Studv 3 1 Dec 1987 1988 1989 1990 1991 1992 1993 1994 1995 Annual Before Decom Termination Payment Earnings Decom Charges Ending Costs Funded (Inflat Adi.l fInflat Adi.l Charges lfnflat Adi l Balgnce llnflat Adi.I Ratio 721 960 805 841 1.746 1,107 1842 2,360 1,775 26 747 31 1,738 135 2,678 499 4,018 280 6.044 462 7,617 313 9,772 69 12.201 3.317 17,292 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A

C T

UJ A

L F

0 R

E C

A S

T 0

2 1

3 2

4 3

5 4

6 5

7 6

8 7

9 8

10 9

11 10 12 11 13 12 14 13 15 14 16 15 17 16 18 17 19 18 20 19 21 20 22 21 23 24 25 26 27 28 29 30 31 32 33 34 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 1,292 1.369 1.450 1,267 1,223 1,517 309 2,163 2.069 2.199 2,330 2,468 2.614 2,768 2,932 3,106 3,290 3,484 3,691 3.909 4.141 4,386 4.645 4,920 5,212 5,520 5.847 6,193 6.560 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 000.

105 031 2,752 21.336 4.881 27,586 5,318 34,354 4,915 40.536 (1,0191 40.740 11.633) 40,624 (3.7591 37,174 6,551 45.888 3.381 51.338 3.927 57,465 4,396 64.191 4.911 71,569 5.475 79,657 6.094 88.519 6,772 98.223 7.514 108.843 8,327 120.460 9.215 133.159 10,187 147,037 11.248 162,194 12.408 178.743 13,674 196.802 15,055 216.503 16,562 237.986 18.206 261.404 19,979 286.903 21.928 314.678 24,051 344.922 26.101 373.846 28.288 398,069 27.217 382.994 23.599 332.090 20.662 290.754 17.260 242.879 13.352 187.886 10.732 151.024 10.222 143,842 9.990 140.579 9,176 129.130 7.53 106.049 450 584 555 615 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1

244 257 290 3,736 4,066 42.291 74,504 61,997 65.135 68,344 47,595 17,404 13,253 20.626 30.617 104.547 59%376 747 1,738 2.678 43,630 6.14%

4.018 44,983 8.93%

6.044 47.646 12.68%

7.617 79.718 9.56%

9,772 84.438 11.57%

12.201 89.436 13.64%

17,292 94,731 18.25%

21.336 100.339 21.26%7 27,586 106.279 25.96%

34,354 112,571 30.52%

40,536 119.235 34.00%

40,740 126.294 32.26%

40,624 107,711 37.72%

37.174 114.087 32.58%

45,888 120.841 37.97%

51,338 127.995 40.11%

57,465 135.572 42.39%

64,191 143.598 44.70%

71,569 152,099 47.05%

79.657 161.103 49.44%

88,519 170,641 51.87%

98,223 180.742 54.34%

108.843 191,442 56.85%

120.460 202.776 59.41%

133.159 214,780 62.00%

147,037 227.495 64.63%

162,194 240,963 67.31%

178,743 255.228 70.03%

196,802 270.337 72.80%

216,503 286.341 75.61%

237,985 303,293 78.47%

261,160 321.248 81.30%

286,645 340.265 84.24%

314.388 360.409 87.23%

341,186 381.745 89.38%

369.781 400.279 92.38%

355.777 381.684 93.21%

308,490 329.775 93.55%

270,092 287,301 94.01%

225,619 239.174 94.33ff 174.535 184,988 94.35%

140,291 148.345 94.57%

133,620 139.723 95.63%

130.589 134,742 96.92%

119.954 122.093 98.25%

98,513 98,704 99.81%

000 00 100.00%

0 0 0

^Q

FUNDING FLOOR ANALYSIS FOR UNIT 1 ($000's)

ESTIMATED FUNDING I

FUNDING FLOOR CURVE Ending Fund 92 Required Minimum Minimrnum Minimum Yeor Balance Est. Costs

% Funded

% Funded Bond Percentage S AMT Percentag e

SAMT 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 6,071 47,646 12.74%

7,617 79.718 9.56%

9,772 84.438 11.59%

12,201 89.436 13.64%

14,909 94,731 15.74%

21,336 100.339 21.26%

27.586 106.279 25.96%

34,354 112.571 30.52%

40.536 119.235 34.00%

40,740 126.294 32.26%

40,624 107.711 37.72%

37.174 114,087 32.58%

45.888 120,841 37.97%

51,338 127,995 40.11%

9.55%

11.58%

13.64%

15.74%

17.87%

20.03%

22.23%

24.47%

26.74%

29.06%

31.40%

33.79%

36.21%

80.00%

10.19%

7.64%

9.26%

10.91%

12.59%

14.30%

16.03%

17.79%

19.58%

21.40%

23.24%

25.12%

27.03%

28.97%

4.857 6,090 7.822 9.761 11,927 14,344 17,034 20.024 23.343 27.022 25.036 28,662 32,665 37,083 12.68%

9.56%

11.58%

13.64%

18.25%

21.26%

25.96%

30.52%

34.00%

32.26%

37.72%

32.58%

37.97%

40.11%

6,044 7,617 9.772 12,201 17,292 21,336 27.586 34,354 40,536 40,740 40,624 37,174 45.888 51.338 Floor Satisfied?

YES YES YES YES YES YES YES YES YES YES YES YES YES YES 2

3 4

5 6

7 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 57,465 135,572 42.39%

64.191 143.598 44.70%

71,569 152.099 47.05%

79.657 161,103 49.44%

88.519 170.641 51.87%

98.223 180.742 54.34%

108.843 191,442 56.85%

120,460 202.776 59.41%

133,159 214.780 62.00%

147,037 227.495 64.63%

162.194 240,963 67.31%

178,743 255.228 70.03%

196.802 270.337 72.80%

216,503 286,341 75.61%

237,985 303,293 77.74%

261,160 321,248 80.88%

286,645 340.265 84.08%

314,388 360,409 87.38%

341,186 381,745 90.62%

369,781 400.279 93.98%

355,777 381,684 95.20%

308.490 329.775 95.95%

270.092 287.301 96.68%

225.619 239.174 97.40%

174,535 184.988 97.89%

140.291 148.345 98.40%

133,620 139,723 100.00%

130,589 134,742 100.00%

119.954 122.093 100.00%

98,513 98.704 100.00%

0.00 0.00 100.00%

38.68%

41.19%

43.73%

46.32%

48.95%

51.62%

54.34%

57.10%

59.91%

62.76%

65.66%

68.60%

71.60%

74.64%

77.73%

80.87%

84.07%

87.32%

90.59%

93.93%

95.17%

95.91%

96.64%

97.33%

97.85%

98.38%

100.00%

81.00%

82.00%

83.00%

84.00%

85.00%

86.00%

87.00%

88.00%

89.00%

90.00%

91.00%

92.00%

93.00%

94.00%

95.00%

96.00%

97.00%

98.00%

99.00%

100.00%

1 00.00%

100.00%

31.33%

33.77%

36.30%

38.91%

41.61%

44.40%

47.27%

50.25%

53.32%

56.48%

59.75%

63.11%

66.58%

70.16%

73.85%

77.64%

81.55%

85.57%

89.69%

93.93%

95.17%

95.91%

96.64%

97.33%

97.85%

98.38%

100.00%

100.O%

100.00%

42,476 48.496 55.207 62.682 70.998 80.241 90,504 101.891 114,513 128,494 143.969 161.085 180.003 200.900 223.967 249.416 277.477 308.401 342.377 375.990 363.257 316.288 277.643 232,787 181,011 145.941 139.723 134.742 122.093 98.704 0.00 42.39%

57.465 YES

06 0

0 I4 at as as i-i-l- -

1996 T 1997-b 1998 1999 12000 T 12001 12002-2003 t 2004 -

2005 2006 2007 +

2008 +

22009 +

12010 2011 2012 2013 12014 2015 2016 2017t

'20181-2019 2020I 2021 2022t 2023 2024 2025 2026 -

'2027 -~

j2028-2029 +

2030+

2031 2032 t 2033 -

2034 -

2035 -

\\

I I I 0:

C 0

0 f*

0 '

CL 0*

5..

C II 0:

0 H

. I

I N

I 1.

I Ii2 I

.~

a Cq L (

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST I

UNIT 2 All Participants Decom Costs In 2001$

$673,314.9 SRP Share in 2001$

$117,762.8 Plan Balance as of 12/311/Olin 2001$

$39,105.0 SRP Share 17.49%

Projected return on investments 7.65%

Projected Inflation 5.92%

Years To Start of Decom (Funding Yrs Left) 21 FV of Total Decom. Charges Discounted to 2025

$468,249.7 FV af 12/31/01 Plan Balance in 21 years S130.848.

FV of Balonce Owed to be Funded by Contdibutions and Eamings 1337A4L0 Current Balance Calender Years Since Year End studv 31-Dec Annual Before Decom Termination Payment Earnings Decom Charges Ending Costs Funded finflat Adi.l llnflat Adi.i Choraes llnflal Adi Balance llnflat Adi.l Ragti 1988 1989 1990 1991 1992 1993 1994 1995 A

C IJ A

L.

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 960 805 841 1.909 1,292 1,761 2.241 1,714 1.379 1,460 I,546 1.452 1,430 1,717 350 2,487 2,427 2.577 2,730 2,892 3,063 3,244 3.436 3.640 3.855 4.083 4,325 4.581 4,852 5.139 5.444 5.766 6.107 6,469 6,852 7,257 7,687 8,142 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 QUQ 12L7913 0.00 74 343 218 394 281 63 3.042 2.537 4.545 4,991 4,635 (966)

(1.561)

(3.620) 6,329 3,299 3,854 4,346 4,887 5.482 6.136 6,853 7.641 8,504 9,449 10.484 11,617 12,856 14,211 15,691 17,308 19.073 21,000 23,101 25.392 27.890 30,609 32.082 27,396 23.935 19,661 16.312 12.884 10.707 9,978 8,965 z48fl 4t0a01 960 1,839 3.023 5,150 6.839 8.881 1 1.185 15.940 19856 25,860 32,398 38.485 38,949 39,105 35,835 44.651 50,377 56,808 63.884 71,663 80,208 89.588 99.877 111,158 123.516 137,048 151,857 168.056 185,764 205.114 226,249 249.323 274,504 301,972 331,925 364.575 400,152 438.870 451,459 385,514 336,813 276,673 229,546 181.296 150.663 140,412 126,149 100.01 607,922 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 33 19.493 93.341 72637 79.801 63.439 61.134 41,340 20.229 23.228 33.239 605 975 960 1,839 43,256 3,023 44,597 5.150 47,237 6.839 78,467 8.881 83.112 11.185 88.032 15,940 93.244 19,856 98.764 25.860 104,611 32,398 110.804 38.485 117.363 38.949 124,311 39,105 117,763 35.835 124.734 44.651 132,119 50,377 139,940 56,808 148.224 63.884 156,999 71,663 166.294 80.208 176,138 89,588 186.566 99,877 197.610 111,158 209.309 123,516 221,700 137.048 234.825 151.857 248,726 168.056 263,451 185.764 279,047 205.114 295.567 226.249 313,064 249,323 331,598 274,504 351.228 301,972 372.021 331.925 394.045 364.575 417,372 400,119 442,047 419,377 448.723 358.118 381.947 312,877 331.921 257.011 271,770 213.234 224.420 168.412 176.571 139,956 145.685 130,434 134,080 117,184 118.790 92.910 92.584 0Q0 Q Qng Q QQ 4.25%

6.78%

10.90%

8.72%

10.69%

12.71%

17.10%

20.10%

24.72%

29.24%'

32.79%

31.33%

33.21%

28.73%

33.80%

36.00%

38.33%

40.69%

43.09%

45.54%

48.02%

50.54%

53.11%

55.71%

58.36%

61.05%

63.79%

66.57%

69.40%

72.27%

75.19%

78.16%

81.17%

84.24%

87.35%

90.51%

93.46%

93.76%

94.26%

94.57%

95.02%

95.38%

96.07%

97.28%

98.65%

100.35%

1 00.00%

F 0

R E

C A

£ I

FUNDING FLOOR ANALYSIS FOR UNIT 2 ($000's)

ESTIMATED FUNDING FUNDING FLOOR CURVE Ending Fund 92 Required Minimum Minimum Minimum i_

Floor Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Balance Est. Costs

% Funde

% Funded Bond Percentage S AMT 1Percentoge SAMT Satisfied?

5,163 6.836 8.887 11,185 13.755 19.856 25.860 32.398 38.485 38.949 39,105 35.835 44,651 50,377 47,646 78.467 83,112 88.032 93.244 98,764 104,611 110.804 117,363 124,311 117.763 124.734 132,119 139,940 10.93%

80.00%

8.71%

80.00%

10.69%

80.00%

12.71%

80.00%

14.75%

80.00%

20.10%

16.83%

80.00%

24.72%

18.94%

80.00%

29.24%

21.09%

80.00%

32.79%

23.27%

80.00%

31.33%

25.49%

80.00%

33.21%

27.75%

80.00%

28.73%

30.04%

80.00%

32.38%

32.37%

80.00%

34.74%

34.73%

80.00%

8.74%

6.97%

8.55%

10.16%

11.80%

13.46%

15.15%

16.87%

18.62%

20.39%

22.20%

24.03%

25.89%

27.79%

4,166 5.469 7,109 8.948 11,004 13.298 15,853 18,696 21.852 25,352 26,140 29.974 34.210 38.885 10.81%

5.150 YES 8.72%

6.839 YES 10.69%

8.881 YES 12.71%

11,185 YES 17.10%

15,940 YES 20.10%

19.856 YES 24.72%

25,860 YES 29.24%

32.398 YES 32.79%

38.485 YES 31.33%

38.949 YES 33.21%

39,105 YES 28.73%

35.835 YES 33.80%

44.651 YES 36.00%

50.377 YES 2

3 4

5 6

7 8

9 10 21 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 56,808 63.884 71,663 80.208 89.588 99.877 111,158 123,516 137.048 151.857 168.056 185.764 205,114 226.249 249.323 274,504 301,972 331,925 364.575 400,119 419,377 358.118 312.877 257,011 213,234 168,412 139,956 130.434 117,184 92.910 0.00 148.224 156.999 166.294 176.138 186.566 197,610 209.309 221,700 234.825 248.726 263,451 279.047 295.567 313.064 331,598 351,228 372,021 394,045 417.372 442,047 448.723 381,947 331.921 271,770 224,420 176.571 145,685 134.080 118.790 92.584 0.00 37.15%

37.14%

80.00%

39.59%

39.58%

81.00%

42.08%

42.07%

82.00%

44.60%

44.59%

83.00%

47.18%

47.16%

84.00%

49.79%

49.77%

85.00%

52.45%

52.42%

86.00%

55.15%

55.12%

87.00%

57.86%

57.85%

88.00%

60.65%

60.64%

89.00%

63.49%

63.47%

90.00%

66.35%

66.34%

91.00%

69.28%

69.26%

92.00%

72.25%

72.23%

93.00%

75.26%

75.25%

94.00%

78.33%

78.32%

95.00%

81.44%

81.43%

96.00%

84.61%

84.60%

97.00%

87.89%

87.82%

98.00%

91.17%

91.07%

99.00%

93.46%

92.55%

100.00%

94.12%

94.02%

100.00%

95.30%

95.24%

100.00%

96.05%

96.00%

100.00%

96.75%

96.72%

100.00%

97.50%

97.40%

100.00%

97.86%

100.00%

98.40%

100.00%

29.71%

32.06%

34.50%

37.01%

39.62%

42.30%

45.08%

47.95%

50.91%

53.97%

57.12%

60.37%

63.72%

67.18%

70.73%

74.40%

78.18%

82.06%

86.07%

90.16%

92.55%

94.02%

95.24%

96.009%

96.72%

97.40%

97.86%

98.40%

100.00%

44.040 50.339 57.366 65.195 73.909 83,598 94.360 106,306 119,552 134.230 150,480 168.460 188.339 210,302 234.554 261.318 290.835 323.371 359.217 398.534 415.299 359,104 316,124 260.898 217.068 1711,987 142,563 131.929 118.790 92.584 0.00 38.33%

56.808 YES

! 1992 tr---a-19 93 1994 f 1995 +-

1996' j1997' 1998 X

1999 --

2000t 2001~

20021, 2003+

2004 +

2005 {

2006 2007 2008 2009 -

2010-'

2011 -

2012-20 13 -

2014-2015 2016-f-2017 -

2018 t 2019 -,

2020 20223 -

12024 h

cm K3 2025+/-

20264-12027C 20281 20291-2030t

!2031+

2032 2033 1 2034 20351

-o o~~ --

OD 10 VII N4

SALT RIVER PROJECT NUCLEAR DECOMMISSIONING TRUST UNIT 3 All Participants Decom Costs In 2001$

$683014.0 SRP Share 17.49%

SRP Share In 2001$

$119,459.1 Projected return on Investments 7.65%

Plan Balance as ot 12/31/01 In 2001$

$41.111.0 Projected Inflation 5.92%

Years To Start of Decom (Funding Yrs Left) 23 FV of Total Decom. Charges Discounted to 2027

$530,330.2 FV of 12/31/01 Plan Balance In 23 year S154.330.4 V oa Balance Owed to be Funded by Contributions and Earrings 3752999.9 Current Balance Calender Annual Before Decom Termination Years Since Year End Payment Earnings Decom Charges Ending Costs Funded tudv 31-Dec Ilnlat Adi.

Infolt Ad.i)

Charaes lintiZtAdi.6l Balonce

,Inlot Adl.l R11t2 1988 960 0.00 960 0.00 960 1989 805 74 1.839 0.00 1.839 45.998 4.0D%

1990 841 343 3.023 0.00 3,023 47.424 6.37%

1991 2,154 218 5.395 0.00 5.395 50,232 10.74%

1992 1,590 413 7.401 0.00 7,401 82.736 8.95%

1993 1,787 304 9.493 0.00 9.493 87.634 10.83%

A 1994 2,290 67 11.849 0.00 11.849 92.822 12.77%

C 1995 1.721 3.221 16.791 0.00 16.791 98.317 17.08%

T U

1996 1,517 2.672 20,980 0.00 20.980 104,138 20.15%

A 1997 1,606 4.802 27.388 0.00 27.388 110,303 24.83%

L 1998 1.702 5.289 34.380 0.00 34.380 116.833 29.43%

1999 1416 4,918 40,714 0.00 40.714 123,749 32.90%

2000 1,391 (1,022) 41,083 0.00 41.083 131.075 31.34%

0 2001 1.675 (1,647) 41.111 0.00 41.111 119,459 34.41%

1 2002 341 (3.805s 37.647 0.00 37.647 126,531 29.75%

2 2003 2162 6.634 46.443 0.00 46.443 134D22 34.65%

3 2004 2.088 3.422 51,953 0.00 51.953 141.956 36.60%

4 2005 2.219 3,974 58.146 0.00 58.146 150,360 38.67%

5 2006 2.350 4.448 64,945 0.00 64,945 159,261 40.78%

6 2007 2.490 4.968 72.403 0.00 72.403 168,689 42.92%

7 2008 2.637 5.539 80.579 0.00 80.579 178,676 45.10%

8 2009 2.793 6.164 89,536 0.00 89.536 189,253 47.31%

9 2010 2.958 6.850 99.344 0.00 99.344 200,457 49,56%

10 2011 3.134 7,600 110,077 0.00 110,077 212.324 51.84%

11 2D12 3.319 8.421 121,817 0.00 121.817 224.894 54.17%

12 2013 3,516 9,319 134.652 0.00 134,652 238.207 56.53%

13 2014 3.724 10.301 148.676 0.00 148,676 252.309 58.93%

14 2015 3.944 11.374 163,994 0.00 163,994 267.246 61.36%

15 2016 4.178 12.546 180.717 0.00 180,717 283D067 63.84%

16 2017 4.425 13.825 198,967 0.00 198.967 29.824 66.36%

F 17 2018 4.687 15.221 218.874 0.00 218.874 317,574 68.92%

O 18 2019 4.964 16,744 240.583 0.00 240.583 336.374 71.52%

R 19 2020 5,258 18,405 264.245 0.00 264.245 356.288 74.17%

E 20 2021 5.569 20,215 290,030 0.00 290,030 377.380 76,85%

C 21 2022 5.899 22.187 318,116 0.00 318.116 399.721 79.58%

A 22 2023 6.248 24.336 348,700 0.00 348.700 423.384 82.36%

S T

23 2024 6.618 26.676 381.994 0.00 381.994 448.449 85.18%

24 2025 7,010 29.223 418.227 0.00 418,227 474.997 88.05%

25 2026 7.425 31.994 457.646 0.00 457.646 503,117 90.96%

26 2027 7.865 35.010 500.521 59.016 441.505 473.885 93.17%

27 2028 0.00 33.775 475.280 82.405 392.875 419.535 93.65%

28 2029 0.00 30.055 422.930 93,131 329.799 351.240 93.90%

29 2030 0.00 25.230 355,029 72.763 282266 29.270 94.32%

30 2031 0.00 21.593 303.859 66.461 237.398 250.526 94.76%

31 2032 0.00 18.161 255.559 60.795 194,764 204,562 95.21%

32 2033 0.00 14.899 209.663 36.153 173.510 180.519 96.12%

33 2034 0.00 13.274 186,784 41,168 145.616 150.038 97.05%

34 2035 0.00 11.140 156,756 48.651 108,105 110.269 98.04%

35 2036 0.00 8.270 116.375 52.148 64.227 64.649 99.35%

36 2037 Q

A 1 69140 68.477 10.01 Q,

100.00%

129,275 5597551 A6PA A

6R1164 L2 Q4m

FUNDING FLOOR ANALYSIS FOR UNIT 3 (5000's)

ESTIMATED FUNDING I

FUNDING FLOOR CURVE Ending Fund 92 Required Minimum Minimum Minimum ii1 Floor Year Bolonce Est, Costs

% Funded

% Funded Band Percentoge S AMT Percentage SAMT Satisfied?

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 5.408 47,646 7.398 82.736 9,498 87.634 11,849 92.822 14.477 98.317 20,980 104,138 27.388 110,303 34.380 116,833 40.714 123,749 41,083 131,075 41,111 119,459 37.647 126,531 46,443 134,022 51,953 141,956 10.93%

8.94%

10.84%

12.77%

14.72%

20.15%

16.72%

24.83%

18.74%

29.43%

20.80%

32.90%

22.89%

31.34%

25.01%

34.41%

27.17%

29.75%

29.36%

34.65%

31.59%

36.60%

33.86%

80.00%

8.74%

4,166 80.00%

7.15%

5.918 80.00%

8.67%

7,598 80.00%

10.21%

9,479 80.00%

11.78%

11.581 80.00%

13.37%

13.926 80.00%

14.99%

16.535 80.00%

16.64%

19.436 80.00%

18.31%

22.656 80.00%

20.01%

26.225 80.00%

21.73%

25,964 80.00%

23.49%

29.722 80.00%

25.27%

33.873 80.00%

27.09%

38.452 11.32%

5.395 YES 8.95%

7,401 YES 10.83%

9,493 YES 12.77%

11.849 YES 17.08%

16.791 YES 20.15%

20.980 YES 24.83%

27.388 YES 29.43%

34.380 YES 32.90%

40,714 YES 31.34%

41.083 YES 34.41%

41,111 YES 29.75%

37.647 YES 34.65%

46.443 YES 36.60%

51.953 YES 2

3 4

5 6

7 8

9 10 21 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 58,146 150.360 64.945 159,261 72.403 168.689 80.579 178.676 89.536 189,253 99,344 200.457 110,077 212.324 121.817 224.894 134.652 238.207 148.676 252.309 163.994 267.246 180.717 283.067 198.967 299.824 218,874 317,574 240.583 336.374 264.245 356.288 290.030 377.380 318,116 399,721 348.700 423.384 381,994 448.449 418,227 474-997 457.646 503,117 441,505 473.885 392.875 419,535 329,799 351,240 282.266 299.270 237.398 250.526 194,764 204,562 173,510 180,519 145,616 150.038 108.105 110,269 64.227 64.649

[0.00) 0.00 36.19%

36.16%

38.51%

38.50%

40.89%

40.88%

43.31%

43.30%

45.77%

45.76%

48.27%

48.26%

50.80%

50.79%

53.38%

53.37%

56.01%

56.00%

58.67%

58.66%

61.38%

61.37%

64.13%

64.12%

66.95%

66.92%

69.79%

69.76%

72.69%

72.65%

75.62%

75.59%

78.60%

78.58%

81.72%

81.61%

84.72%

84.69%

87.85%

87.81%

89.30%

89.24%

90.96%

90.70%

93.17%

92.14%

93.65%

93.60%

94.89%

94.87%

95.75%

95.73%

100.00%

96.46%

100.00%

97.18%

100.00%

97.79%

100.00%

98.40%

100.00%

80.00%

28.93%

43.499 80.00%

30.80%

49,057 80.00%

32.71%

55.172 81.00%

35.07%

62.668 82.00%

37.52%

71,011 83.00%

40.05%

80.288 84.00%

42.67%

90,594 85.00%

45.37%

102,031 86.00%

48.16%

114,715 87.00%

51.04%

128,769 88.00%

54.01%

144,329 89.00%

57.07%

161,546 90.00%

60.23%

180,581 91.00%

63.49%

201,614 92.00%

66.84%

224,840 93.00%

70.30%

250.471 94.00%

73.86%

278.740 95.00%

77.53%

309,903 96.00%

81.31%

344.237 97.00%

85.18%

381,971 98.00%

87.46%

415,431 99.00%

89.80%

451,775 100.00%

92.14%

436.647 100.00%

93.60%

392.695 100.00%

94.87%

333.229 100.00%

95.73%

286,490 100.00%

96.46%

241.669 100.00%

97.18%

198,786 100.00%

97.79%

176.529 100.00%

98.40%

147,640 100.00%

100.00%

110,269 100.00%

100.00%

64,649 100.00%

100.00%

0.00 38.67%

58.146 YES

1991 1992 1993 1994 +/-

11995 I 1996 1997 1998 1999 2000 2001 2002 -

v 2003 +

2004-2005 2006 +,

2007 2008 -_.

.2009 2010 2011 2012 2013 2014 +

2015+

12016 ;

12017 -

20181 2019

!2020 -

2021 2022 -

2023 2024 +

2025 +

12026 +

20271 2028-;

2029 T 2030 I 2031 2032 2033 2034 2035 2036 +

2037 in oL i

5 o

9.

0 (t

o oo CLoq 0

El Ie

'S

.5 Ii I

>-M coC a

\\

a 5 14

-nl(ac

Palo Verde Nuclear Generating Station Appendix B, Tab 3 Units 1, 2, & 3 EPE 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Model Assumptions:

Assumed Rate of Earnings Assumed Rate of Cost Escalation Assumed Rate of Inflation Treatment of Water Reclamation Facility Contingency Factor 7.3310%

5.2925%

3.9031%

Included 25.0000%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 Part 3. Tables and Curves 3.1 Table of Estimated Denosits, Income And Committed Accumulations to End of Funding Period for Each Unit:

(Curves presented are those most recently approved by the Termination Funding Committee) 3.1.1 Table For Unit 1 (In Thousands):

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Estimated Deposits 1,274.596 1,284.594 1,335.472 1,388.364 1,443.352 1,500.517 1,559.947 1,621.730 1,685.960 1,752.734 1,822.153 1,971.475 2,049.557 2,130.732 2,321.329 2,413.268 2,508.848 2,758.042 2,867.277 Estimated Income 266.134 327.887 499.183 638.884 793.156 963.255 1,150.542 1,356.483 1,582.665 1,830.800 2,102.737 2,402.600 2,734.343 3,097.052 3,496.227 3,937.120 4,418.261 4,947.099 5,530.699 Estimated Accumulation 3,065.044 4,605.774 6,135.622 7,970.276 9,997.525 12,234.033 14,697.806 17,408.294 20,386.507 23,655.133 27,238.667 31,163.557 35,537.632 40,321.532 45,549.315 51,366.871 57,717.259 64,644.367 72,349.508 80,747.484 Estimated Costs 43,696.922 72,015.436 73,556.865 77,449.852 81,548.874 85,864.837 90,409.222 95,194.117 100,232.252 105,537.030 111,122.563 117,003.709 123,196.114 129,716.251 136,581.465 143,810.020 151,421.146 159,435.089 167,873.168 176,757.832 Percent Funded 7.01%

6.40%

8.34%

10.29%

12.26%

14.25%

16.26%

18.29%

20.34%

22.41%

24.51%

26.63%

28.85%

31.08%

33.35%

35.72%

38.12%

40.55%

43.10%

45.68%

Funding Floor 5.61%

5.12%

6.67%

8.23%

9.81%

11.40%

13.01%

14.63%

16.27%

17.93%

19.61%

21.31%

23.08%

24.87%

27.01%

29.29%

31.64%

34.06%

36.63%

39.29%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.1 Table For Unit 1 (In Thousands) - continued:

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Estimated Deposits 2,980.838 3,317.760 3,449.163 3,585.771 4,065.222 4,226.229 4,393.613 5,138.776 5,342.302 5,553.889 6,957.220 7,232.768 7,519.229 7,817.036 Estimated Income 6,166.623 6,865.187 7,636.102 8,475.150 9,397.178 10,416.018 11,523.935 12,743.895 14,096.977 15,567.572 17,197.815 19,025.510 21,011.985 23,106.171 25,087.342 25,233.305 21,501.537 17,190.449 12,240.609 6,587.274 2,415.824 Estimated Accumulation 89,894.946 100,077.893 111,163.158 123,224.079 136,686.478 151,328.725 167,246.272 185,128.943 204,568.222 225,689.683 249,844.719 276,102.996 304,634.210 334,709.788 358,030.257 360,113.346 306,855.984 245,330.930 174,690.029 94,009.301 34,477.067 Estimated Costs 186,112.716 195,962.705 206,334.004 217,254.202 228,752.350 240,859.036 253,606.467 267,028.554 281,161.003 296,041.410 311,709.360 328,206.534 345,576.819 362,973.935 380,323.895 376,077.046 317,265.368 251,175.083 177,200.486 94,692.148 34,477.067 Percent Funded 48.30%

51.07%

53.88%

56.72%

59.75%

62.83%

65.95%

69.33%

72.76%

76.24%

80.15%

84.12%

88.15%

92.21%

94.14%

95.76%

96.72%

97.67%

98.58%

99.28%

100.00%

Funding Floor 42.02%

44.94%

47.95%

51.05%

54.38%

57.80%

61.33%

65.17%

69.12%

73.19%

77.75%

82.44%

87.27%

92.21%

94.14%

95.76%

96.72%

97.67%

98.58%

99.28%

100.00%

23

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.2 Table for Unit 2 (In Thousands):

Estimated Deposits Estimated Income Year 1991 1992 1993 1994 1995 1996 1997

-1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1,148.211 1,156.671 1,202.482 1,250.107 1,299.619 1,351.092 1,404.603 1,460.234 1,518.068 1,578.192 1,640.698 1,767.574 1,837.581 1,910.360 2,070.670 2,152.681 2,237.940 2,444.911 2,541.744 2,642.412 2,917.665 3,033.222 3,153.356 304.386 403.387 522.202 653.472 798.274 957.772 1,133.222 1,325.984 1,537.522 1,769.421 2,023.390 2,302.983 2,611.632 2,948.891 3,319.462 3,727.873 4,173.328 4,662.132 5,200.322 5,786.468 6,429.184 7,136.661 7,906.280 Estimated Accumulation 3,619.007 5,071.604 6,489.839 8,214.523 10,118.102 12,215.996 14,524.859 17,062.684 19,848.902 22,904.492 26,252.106 29,916.194 33,986.751 38,435.964 43,295.215 48,685.347 54,565.901 60,977.170 68,084.212 75,826.278 84,255.157 93,602.006 103,771.890 114,831.526 Estimated Costs 43,321.662 70,884.836 72,375.311 76,205.765 80,238.944 84,485.579 88,956.966 93,665.001 98,622.208 103,841.775 109,337.586 115,124.263 121,217.198 127,632.602 134,387.539 141,499.981 148,988.848 156,874.061 165,176.599 173,918.548 183,123.162 192,814.930 203,019.633 213,764.419 Percent Funded 8.35%

7.15%

8.97%

10.78%

12.61%

14.46%

16.33%

18.22%

20.13%

22.06%

24.01%

25.99%

28.04%

30.11%

32.22%

34.41%

36.62%

38.87%

41.22%

43.60%

46.01%

48.54%

51.11%

53.72%

Funding Floor 6.68%

5.72%

7.17%

8.62%

10.09%

11.57%

13.06%

14.57%

16.10%

17.65%

19.21%

20.79%

22.43%

24.09%

25.77%

27.87%

30.03%

32.26%

34.62%

37.06%

39.57%

42.23%

44.98%

47.81%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.2 Table for Unit 2 (In Thousands) - continued:

Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Estimated Deposits 3,535.811 3,675.850 3,821.436 4,392.538 4,566.509 4,747.370 5,730.719 5,957.690 6,193.650 8,791.549 9,139.748 Estimated Income 8,750.184 9,679.802 10,690.173 11,799.390 13,024.259 14,354.720 15,821.210 17,451.419 19,221.815 21,208.585 23,478.715 25,671.399 27,381.115 27,376.844 23,348.142 18,467.306 12,867.270 6,475.243 2,359.251 Estimated Accumulation 127,117.521 140,473.173 154,984.782 171,176.710 188,767.478 207,869.568 229,421.497 252,830.607 278,246.072 308,246.207 340,864.670 366,365.540 390,765.507 390,704.542 333,209.534 263,553.410 183,633.329 92,410.462 33,669.696 Estimated Costs 225,077.871 236,990.086 249,532.753 262,739.239 276,644.676 291,286.057 306,702.331 322,934.509 340,025.772 358,021.589 376,969.831 396,741.353 414,599.909 407,652.600 344,105.794 269,530.194 186,096.933 93,077.319 33,669.696 Percent Funded 56.48%

59.27%

62.11%

65.15%

68.23%

71.36%

74.80%

78.29%

81.83%

86.10%

90.42%

92.34%

94.25%

95.84%

96.83%

97.78%

98.68%

99.28%

100.00%

Funding Floor 50.83%

53.94%

57.14%

60.59%

64.14%

67.79%

71.81%

75.94%

80.19%

85.24%

90.42%

92.34%

94.25%

95.84%

96.83%

97.78%

98.68%

99.28%

100.00%

25

EL PASO ELECTRIC COMPANY Anfiual Funding Status Report For the Year Ended December 31, 2004 3.1.3 Table for Unit 3 (In Thousands):

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Estimated Deposits 1,282.171 1,294.243 1,345.503 1,398.793 1,454.194 1,511.789 1,571.665 1,633.912 1,698.625 1,765.900 1,835.841 1,968.776 2,046.751 2,127.815 2,293.851 2,384.702 2,479.150 2,690.503 2,797.064 2,907.844 3,183.853 3,309.953 3,441.047 Estimated Income 84.542 183.753 296.535 421.734 560.441 713.834 883.188 1,069.880 1,275.398 1,501.348 1,749.467 2,023.290 2,326.245 2,657.989 3,023.184 3,426.332 3,866.802 4,350.805 4,884.311 5,466.162 6,104.764 6,808.145 7,574.165 Estimated Accumulation 652.302 2,019.015 3,442.544 5,084.582 6,905.110 8,919.745 11,145.367 13,600.220 16,304.012 19,278.034 22,545.282 26,130.589 30,122.655 34,495.652 39,281.456 44,598.491 50,409.524w 56,755.476 63,796.785 71,478.159 79,852.165 89,140.783 99,258.881 110,274.093 Estimated Costs 46,068.418 74,741.789 76,440.553 80,486.159 84,745.877 89,231.041 93,953.581 98,926.061 104,161.709 109,674.453 115,478.958 121,590.666 128,025.835 134,801.584 141,935.939 149,447.879 157,357.387 165,685.505 174,454.387 183,687.361 193,408.989 203,645.132 214,423.023 225,771.331 Percent Funding Funded Floor 1.42%

1.13%

2.70%

2.16%

4.50%

3.60%

6.32%

5.05%

8.15%

6.52%

10.00%

8.00%

11.86%

9.49%

13.75%

11.00%

15.65%

12.52%

17.58%

14.06%

19.52%

15.62%

21.49%

17.19%

23.53%

18.82%

25.59%

20.47%

27.68%

22.14%

29.84%

23.87%

32.04%

25.63%

34.25%

27.75%

36.57%

29.99%

38.91%

32.30%

41.29%

34.68%

43.77%

37.21%

46.29%

39.81%

48.84%

42.49%

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.1.3 Table for Unit 3 (In Thousands) - continued:

Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Estimated Deposits 3,814.940 3,966.035 4,123.113 4,659.502 4,844.046 5,035.900 5,889.479 6,122.738 6,365.235 8,106.273 8,427.330 8,761.103 2,243.965 Estimated Income 8,414.484 9,340.145 10,347.106 11,452.246 12,671.365 13,996.451 15,454.105 17,068.788 18,822.970 20,768.965 22,953.584 25,327.357 27,779.761 29,734.433 31,725.894 32,272.786 28,835.010 23,533.147 17,436.197 10,463.311 4,310.701 Estimated Accumulation 122,503.517 135,809.697 150,279.916 166,391.665 183,907.075 202,939.426 224,283.010 247,474.536 272,662.741 301,537.978 332,918.891 367,007.351 397,031.077 424,350.531 452,771.373 460,576.256 411,514.545 335,849.805 248,838.081 149,325.578 61,519.522 Estimated Costs 237,720.247 250,301.558 263,548.733 277,497.013 292,183.503 307,647.274 323,929.463 341,073.385 359,124.646 378,131.267 398,143.812 419,215.517 441,402.440 462,220.811 483,203.810 483,014.441 426,558.518 344,686.147 252,952.800 150,544.024 61,519.522 Percent Funded 51.53%

54.26%

57.02%

59.96%

62.94%

65.96%

69.24%

72.56%

75.92%

79.74%

83.62%

87.55%

89.95%

91.81%

93.70%

95.35%

96.47%

97.44%

98.37%

99.19%

100.00%

Funding Floor 45.35%

48.29%

51.32%

54.57%

57.91%

61.35%

65.08%

68.93%

72.89%

77.35%

81.95%

86.67%

89.95%

91.81%

93.70%

95.35%

96.47%

97.44%

98.37%

99.19%

100.00%

27

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.2 Percent Funded Curve and Funding Floor Curve for Each Unit:

3.2.1 Unit 1 Curve:

0%

-/___________________

0 %

0%

Committed t ccumulation 0%

0 %

0%

Actual 0%

12%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.2.2 Unit 2 Curve:

0I 0

'0

'6 I 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 29

EL PASO ELECTRIC COMPANY Annual Funding Status Report For the Year Ended December 31, 2004 3.2.3 Unit 3 Curve:

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

~~~Floor Committed Accumulation 1X1XX7W~~ctual<XX 2004 Funding Status

$ Amount Percent Actual 27,342 21.70 Committed 32,237 25.59 Floor 25,787 20.47 0%

ii )91 1994 1997 2000 2003 2006 2009 20i 2 2015 2018 2021 2024 2027 2030 2033

Palo Verde Nuclear Generating Station Appendix B, Tab 4 Units 1, 2, & 3 SCE 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Assumptions Used in Developing Committed Accumulations Cost Study 2001 TLG study, including all Summary Table Costs (page xiii of xix)

(all non-unit specific costs are allocated equally among all three units except Stored Steam Generator & Storage Facility allocated to Unit 2 only)

Contingency Factors:

2001 TLG Study Annual Escalation Assumption:

Approximately 7.3% over the funding period.

Rate of Return Assumption:

5.25% per year (after tax)

Southern California Edison Company Palo Verde Unit 1 Funding Plan 1 55%

130%

105%

80%

55%

30%

5%

-20%

fin Adz Actual

/1\\

Accmlai

-w-

j k I>

Fnding Committed Floor Accumulations 2004 FUNDING STATUS

$ AMOUNT COMMITTED ACTUAL FLOOR

$123,535

$ 181,062

$ 98,828 PERCENT 103%

151%

82%

v-0) 0)

In 0)CD N-0) 0, V1-0) cm 0F)

CM N

CD CM o1 0m C,

U)

CM 0C'1 0) 0N v-N 0N\\

Cf, CM 0

cm LO 0M CM N-CM 00j 0) cm 0Nq cm

Southern California Edison Company Palo Verde Unit 2 Funding Plan 150%

125%

100%

75%

50%

25%

0%

T-C2 LA N;

0 0)o

)

0)

CD 0

0D CD

0)

0) 0)

7-"

T-I-

1-7r-N LO 0

0cm 8CM 2-0N Mv 7-.

0cm LO v-0 Nl T-0 cm 0a 0Nv 7-N co C,,

0Nv LO ram 0)

NO 8

CM CM CM 2-Mv 0

N20

Southern California Edison Company Palo Verde Unit 3 Funding Plan 155%

-Actual Accumulation 130%

105% -

2003 FUNDING STATUS 55%

Funding

$ AMOUNT PERCENT 3

Floor COMMITTED

$148,982 112%

Committed Accumulations ACTUAL

$197,625 149%

5% -

FLOOR

$119,185 89%

-20%

_v C)

O' o

C)

C9 U1 C

LO co Ir o

c-IL

0) c u

C) 0) 6; T-Ir-T-Q _r,C Q QX o) ow T) a)

aw) o o

o o

o o0 o

o0 o

o O~

CO I a

cJ c

_r T

C N

Mfi CMi C14 C0l

-4 04 i

CU C0l C

CM CMl CYl C

CM C 0lC4

Southern California Edison Company ANPP Funding Plan - All Units 150% -I God~,4s/Actual Accumulation 125%

100%

75%

50%

25%

0%

2003 FUNDING STATUS

$ AMOUNT PERCENT Funding COMMITTED

$ 407,131 106%

Floor ACTUAL

$ 562,003 146%

Committed Accumulations FLOOR

$ 326,064 85%

0) 0)

0) to CD CD 00)-

Ir-co If Ns V-0N co 0cm Ln 0cm r-0cm On CM 0

cm N

cv, cm 0

cm to Nv 0N 0) 2N 0m COco 0N 6)C7 oN

90 N

N N

N

SOUTHERN CALIFORNIA EDISON COMPANY 2004 PALO VERDE UNIT 1 FUNDING STATUS (S THOUSANDS) 0 (1)

(2)

FUNDING PLAN (3)

(4)

(5)

(6)

(7)

(8)

(9)

XEAR FUND S 1991 25,499 1992 32,402 1993 38,797 1994 45,527 1995 54,963 1996 64,895 1997 75,348 1998 86,350 1999 97,930 2000 110,118 2001 122,945 2002 136,446 2003 1S0,656 2004 165,611 2005 181,352 2006 197,919 2007 215,356 2008 233,709 2009 253,025 2010 273,355 2011 294,752 2012 317,273 2013 340,976 2014 365.923 2015 392,180 2016 419,816 2017 448,903 2018 479,516 2019 511,737 2020 545,650 2021 581,343 2022 618,909 2023 658,448 2024 700,063 2025 696,219 2026 594,779 2027 477,988 2028 344,308 2029 192,070 2030 69,900 2031 0

2032 2033 2034 2035

=

EST. COST

%6 Ft]NfDED 44,219 58%

69,860 46%

74,905 52%

80,314 57%

86,114 64%

92,333 70%

99,000 76%

106,150 81%

113,815 86%

122,034 90%

130,847 94%

140,296 97%

150,427 100%

161,290 103%

172,937 105%

185,426 107%

198,816 108%

213,174 110%

228,568 111%

245,074 112%

262,772 112%

281,747 113%

302,094 113%

323,909 113%

347,300 113%

372,380 113%

399,271 112%

428,104 112%

459,019 111%

492,167 111%

527,709 110%

565,817 109%

606,677 109%

650,487 108%

656,864 106%

566,305 105%

459,182 104%

333,566 103%

187,340 103%

68,615 102%

0 100%

FUNDING FLOOR CURVE CRITERIA PERCENT 80%

46%

80%

37%

80%

41%

80%

45%

80%

51%

80%

56%

80%

61%

80%

65%

80%

69%

80%

72%

80%

75%

80%

78%

80%

82%

81%

85%

82%

88%

83%

90%

84%

92%

85%

94%

86%

96%

87%

98%

88%

99%

89%

100%

90%

102%

91%

103%

92%

104%

93%

105%

94%

105%

95%

106%

96%

106%

97%

107%

98%

107%

99%

107%

100%

108%

100%

106%

100%

105%

100%

104%

100%

103%

100%

103%

100%

102%

100%

S AMOJUNT 20,399 25,922 31,038 36,422 36.351 42,746 49,760 56,862 64,987 72,920 81,660 80,958 89,488 98,828 FUND S 27,001 33,787 41,611 45,930 64,177 79,273 99,810 122,110 136,263 141,277 136,837 136,336 160,956 181,062 74,905 80,314 71,191 76,331 81,842 87,751 94,458 101,278 108,590 104,328 111,860 119,937 ACTUAL FUNDING ESLCo:I 96 FUNDED 44,219 61%

69,860 48%

56%

57%

90%

104%

122%

139%

144%

139%

126%

131%

144%

151%

SOUTHERN CAUFORNIA EDISON COMPANY.

2004 PALO VERDE UNIT 2 FUNDING STATUS (S THOUSANDS)

(1)

(2)

FUNDING PLAN (3)

(4)

(5)

FUNDING FLOOR CURVE (6)

(7)

(8)

ACTUAL FUNDING (9)

VAR 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 FUND S 24,496 31,537 38,092 44,991 54,543 64,597 75,179 86,317 98,039 110,376 123,362 137,029 151,413 166,553 182,487 199,259 216,910 235,488 255,042 275,622 297,283 320,081 344,076 369,330 395,910 423,886 453,331 484,321 516,939 551,268 587,400 625,430 665,455 707,582 751,921 790,166 776,927 657,874 520,952 364,378 186,212 62,940 0

E5T-COST T

IUNDED 43,826 56%

68,737 46%

74,905 51%

80,314 56%

86,114 63%

92,333 70%

99,000 76%

106,150 81%

113,815 86%

CRDRA 80%

80%

PERCENT 45%

37%

41%

45%

51%

56%

61%

65%

69%

72%

75%

78%

81%

83%

S AMOUN 19,597 25,230 30,474 35,993 37,442 44,368 51,648 59,021 68,410 76,761 85,961 89,426 98,818 108,051 FlND S 25,943 32,869 40,791 45,358 63,426 78,392 98,759 120,878 135,329 140,883 137,075 137,161 162,492 183,316 LEST COST

% FUNDEn 43,826 59%

68,737 48%

74,905 54%

80,314 56%

73,893 86%

79,228 99%

84,948 116%

91,082 133%

99,433 136%

106,613 132%

114,310 120%

114064 120%

122,300 133%

131,130 140%

122,034 130,847 140,296 150,427 161,290 90%

94%

98%

101%

103%

80%

172,937 185,426 198,816 213,174 228,568 245,074 262,772 281,747 302,094 323,909 347,300 372.380 399,271 428,104 459,019 492,167 527,709 565,817 606,677 650,487 695,716 742,858 739,787 631,382 503,822 354,929 182,311 61,939 0

106%

107%

109%

110%

112%

113%

114%

113%

112%

111%

110%

109%

108%

106%

105%

104%

103%

102%

100%

80%

81%

82%

83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

100%

84%

87%

89%

92%

94%

96%

97%

99%

100%

101%

103%

104%

105%

106%

107%

108%

106%

105%

104%

103%

102%

100%

SOUTHERN CALIFORNIA EDISON COMPANY 2004 PALO VERDE UNIT 3 FUNDING STATUS (S THOUSANDS)

(1)

(2)

FUNDING PLAN (3)

(4)

XEAR 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Z006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Z032 2033 2034 2035

=

FUND S 26,087 34,110 41,562 49,405 59,673 70,480 81,854 93.826 106,426 119,688 133,646 148,336 163,798 180,072 197,200 215,227 234,201 254,171 275,189 297,311 320,594 345,099 370,891 398,037 426,609 456,680 488,330 521,641 556,702 593,603 632,442 673,319 716,343 761,625 809,284 859,446 912,241 960,134 951,127 845,825 700,015 532,660 341,615 150,456 0

5T. COT 9 FUNQFD 48,798 73,450 74,905 80,314 86,114 92,333 99,000 106,150 113,815 122,034 130,847 140,296 150,427 161,290 172,937 185,426 198,816 213,174 228,568 245,074 262,772 281,747 302,094 323,909 347,300 372,380 399,271 428,104 459,019 492,167 527,709 565,817 606,677 650,487 700,291 753,907 811,628 873,769 881,253 793,489 664,025 510,759 330,855 147,093 (0) 53%

46%

55%

62%

69%

76%

83%

88%

94%

98%

102%

106%

109%

112%

114%

116%

118%

119%

120%

121%

122%

123%

122%

121%

120%

119%

118%

117%

116%

114%

112%

110%

1 08%

107%

105%

104%

103%

102%

100%

CR8TERA 8

8 81 81 81 8'

81 81 8S 8i 8i 8i 81 81 81 89 81 8:

8.

8' 81 81 91 9t 91 91 101 101 10(

10(

1 0(

1o(

1 0t (5)

FUNDING FLOOR CURVE PERCENT 0%

43%

0%

37%

0%

44%

0%

49%

D%

55%

0%

61%

0%

66%

0%

71%

0%

75%

0%

78%

0%

82%

0%

85%

0%

87%

0%

89%

91%

0%

93%

1%

95%

2%

98%

3%

100%

4%

102%

5%

104%

6%

1105%

7%

1107%

3%

108%

I%

109%

0%

110%

1%

111%

2%

112%

3%

113%

4%

113%

5%

114%

6%

114%

7%

115%

8%

115%

M%

114%

0%

114%

0%

112%

N%

110%

0%

108%

0%

107%

0%

1 05%

0%

104%

0%

103%

3%

102%

t)%

100%

(6)

S AMOUNT 20,870 27,288 33,250 39,524 46,253 54,390 58,318 72,401 80,398 89,871 100,293 98,120 108,182 119,185 FuNa S 27,730 35,578 44,473 49,825 69,421 85,640 107,775 131,789 147,469 153,445 149,226 149,306 176,507 197,625 (7) 122,908 115,708 124,062 133,019 121%

129%

142%

14996 (8)

(9)

ACTUAL FUNDING EST. COST 46 FUlNnDF 48,798 57%

73,450 4896 74,905 59%

80,314 6296 83,434 83%

89,458 96%

95,917 1129%

102,842 128%

106,913 138%

114,632 134%

SOUTHERN CALIFORNIA EDISON COMPANY 2004 ANPP FUNDING PLAN-ALL UNITS (S THOUSANDS)

(1)

(2)

FUNDING PLAN (3)

(4)

(5)

FUNDING FLOOR CURVE (6)

(7)

(8)

ACTUAL FUNDING (9) xYA FND S 1991 76,082 1992 98,049 1993 118,451 1994 139,923 1995 169,179 1996 199,972 1997 232,381 1998 266,493 1999 302,39S 2000 340,182 2001 379,953 2002 421,811 2003 465,867 2004 512,236 2005 561,039 2006 612,405 2007 666,467 2008 723,368 2009 783,256 2010 846,288 Z011 912,629 2012 982,453 2013 1,055,943 2014 1,133,290 2015 1,214,699 2016 1,300,382 2017 1,390,564 2018 1,485,478 2019 1,585,378 2020 1,690,521 2OZ1 1,801,185 2022 1,917,658 2023 2,040,246 2024 2,169,270 2025 2,257,424 2026 2,244,391 2027 2,167,156 2028 1,962,316 2029 1,664,149 2030 1,280,103 2031 886,227 2032 595,600 2033 341,615 2034 150,456 2035 0

136,843 212,047 224,715 240,942 258,342 276,998 297,001 318,449 341,445 366,102 392,540 420,887 451,281 483,870 518,812 556,278 596,449 639,521 685,704 735,221 788,315 845,242 906,281 971,727 1,041,900 1,117,140 1,197,813 1,284,312 1,377,058 1,476,501 1,583,126 1,697,450 1,820,030 1,951,462 2,052,870 2,063,070 2,010,597 1,838,717 1,572,415 1,217,033 846,336 572,698 330,855 147,093 (0)

M. COST FUNDED

=

56%

46%

53%

58%

65%

72%

78%

84%

89%

93%

97%

100%

103%

106%

108%

110%

112%

113%

114%

115%

116%

117%

116%

115%

114%

113%

112%

111%

110%

109%

108%

107%

106%

1 05%

105%

104%

103%

102%

0%

CRITERIA 80%

80%

81%

82%

83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

100%

=

PERCENT 44%

37%

42%

46%

52%

58%

63%

67%

71%

74%

77%

80%

83%

85%

87%

89%

92%

94%

96%

98%

1 00%

101%

103%

104%

105%

106%

107%

108%

109%

110%

109%

108%

107%

106%

105%

104%

103%

102%

0%

=

S AMOUNT 60,866 78,439 94,761 111,938 120,045 141,504 159,726 188,284 214,173 239,957 268,347 268,504 296,488 326,064 0

0 0

FtlND S 80,674 102,234 126,875 141,113 197,024 243,378 306,343 374,776 419,061 435,605 423,138 422,803 499,955 562,003 ST. CO 9 Fl UNnED 136,843 59%

212,047 48%

224,715 56%

240,942 59%

228,518 86%

245,017 99%

262,707 117%

281,675 133%

300,804 139%

322,522 135%

345,808 122%

334,100 127%

358,222 140%

384,086 146%

Palo Verde Nuclear Generating Station Appendix B, Tab 5 Units 1, 2, & 3 PNM 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Major Assumptions in Developing Accumulation Curves Portfolio Yield Mortality Policy Loan Interest Rate Inflation Rate Side Fund Interest Rate 9.50%

1983 Group Annuity Mortality 8.50%

5.00%

5% After Tax Section 2.1.8 [Restated]

Decommissioning Cost Assumptions Used in the Annual Funding Status Report Cost Study 200ITLG Water Reclamation Facility Included Water Treatment and Ponds Included Reservoir Included ISFSI Included Unit 2 Steam Generator Storage Included In addition:

After Tax Rate of Return Assumption 6.31%

PALO VERDE UNIT I

($NO)

Funding Plan Year Fund S Est. Costs % Funded 1991 1,095 28,746 3.81%

1992 3,450 45,099 7.65%

1993 5,981 47,354 12.63%

1994 6,807 49,722 13.69/

1995 7,018 45,959 15.27%

1996 8,107 48,257 16.80%/6 1997 9,212 50,670 18.18%

1998 11,170 56,873 19.64%

1999 12,953 59,717 21.69/o 2000 15,193 62,703 24.23%

2001 16,828 62,816 26.79%

2002 19,371 65,956 29.37%

2003 22,147 69,254 31.98%

2004 25,153 72,717 34.59%

2005 28,426 76,353 37.23%

2006 31,980 80,170 39.89%

2007 35,818 84,179 42.55%

2008 39,960 88,388 45.21%

2009 44,538 92,807 47.990/%

2010 49,396 97,448 50.69/o 2011 54,588 102,320 53.35%

2012 60,390 107,436 56.21%

2013 66,602 112,808 59.04%

2014 73,260 118,448 61.85%

2015 80,381 124,371 64.63%

2016 87,991 130,589 67.38%

2017 96.490 137,119 70.37%

2018 105,562 143,974 73.32%

2019 115,239 151,173 76.23%

2020 125,557 158,732 79.10°%

2021 136,551 166,668 81.93%

2022 148,524 175,002 84.87%

2023 160,083 181,954 87.98%

2024 172,616 189,127 91.27%

2025 170,294 184,061 92.52%

2026 143,299 152,836 93.76%

2027 119,683 125,969 95.01%

2028 89,667 93,150 96.26%

2029 58,765 60,266 97.51%

2030 34,612 35,050 98.75%

2031 20,748 20,748 100.00%

2032 8,527 8,527 100.00%

2033 7,557 7,557 1 00.00%

2034 19,732 19,732 100.00%

2035 18,026 18,026 100.00%

2036 31,357 31,357 100.000%

2037 14,117 14,117 100.00/,

Funding Floor Curve Criteria Percent S Amount 80%

3.05%

876 80%

6.12%

2,760 80%

10.10/o 4,785 80%

10.95%

5,446 80%

12.22%

5,614 80%

13.44%

6,486 80%

14.54%

7,369 80%

15.71%

8,936 80%

17.35%

10,362 80%

19.38%

12,154 80% 21.43%

13,463 80%

23.56%

15,497 80%

25.58%

17,718 80% 27.67%

20,122 80%

29.78%

22,741 81%

32.31%

25,904 82%

34.89%

29,371 83%

37.52%

33,167 84%

40.31%

37,412 85% 43.09%

41,987 86%

45.88%

46,945 87%

48.90%

52,539 88%

51.96%

58,609 89%

55.05%

65,202 90%

58.17%

72,343 91%

61.32%

80,072 92% 64.74%

88,771 93%

68.19%

98,173 94%

71.66%

108,325 95%

75.15%

119,279 96%

78.65%

131,089 97%

82.32%

144,068 98%

86.22%

156,881 99%

90.36%

170,890 100%

92.52%

170,294 100%

93.76%

143,299 100%

95.01%

119,683 100%

96.26%

89,667 100%

97.51%

58,765 100%

98.75%

34,612 100% 100.00%

20,748 100% 100.00%

8,527 100% 100.00/o 7,557 100% 100.00%

19,732 100% 100.00%

18,026 100% 100.00%

31,357 100% 100.00%/0 14,117 Actual Funding Fund S Est. Cost % Funded 1,096 28,746 3.81%

2,334 45,099 5.18%

3,691 47,354 7.79%

4,117 49,722 8.28%

4,235 45,959 9.21%

8,094 48,257 16.77%

9,999 50,670 19.73%

14,095 56,873 24.78%

16,354 59,717 27.39%/

17,447 62,703 27.82%

17,673 62,816 28.13%

20,057 65,956 30.41%

24,991 69,254 36.09%

29,313 72,717 40.31 %j Exhibit 3.4

Public Service Company Of New Mexico Palo Verde Unit 1 120.00%

2004 Funding Status

$($000)

Percent 100.00%

Committed

$25,153 34.59%

Actual

$29,313 40.31%

Floor

$20,122 27.67%

80.00%

Committed Accumulation 60.00% +1-Actual Accumulations 40.00%

20.00%

0.00%

1; Ii N419 Ne2 9u a

I'q99,l1

,eot

-e°t el

,°° IPNN IPN°5 10`3 10<1 e>°6

¢ e~t e,

101* BLO TRO So SlpI1 Ipo Exhibit 3.4

Funding Plan Year Fund $Est Costs %Funded 1991 1,096 28,499 3.85%

1992 3,426 44,375 7.72%

1993 5,936 46,594 12.74%

1994 6,756 48,923 13.81%

1995 7,346 47,703 15.40%

1996 8,485 50,088 16.94%

1997 9,645 52,593 18.34%

1998 11,860 59,869 19.81%

1999 13,754 62,862 21.88%

2000 16,132 66,005 24.44%

2001 18,557 68,678 27.02%

2002 21,359 72,112 29.62%

2003 24,419 75,717 32.25%

IvUU4 Z7i9 79,503 3 4.=6M 2005 31,346 83,478 37.55%

2006 35,271 87,652 40.24%

2007 39,501 92,035 42.92%

2008 44,066 96,637 45.60%

2009 49,111 101,468 48.40%

2010 54,475 106,542 51.13%

2011 60,197 111,869 53.81%

2012 66,589 117,462 56.69%

2013 73,446 123,336 59.55%

2014 80,784 129,502 62.38%

2015 88,644 135,977 65.19%

2016 97,045 142,776 67.97%

2017 106,410 149,915 70.98%

2018 116,421 157,411 73.96%

2019 127,085 165,281 76.89%

2020 138,455 173,545 79.78%

2021 150,589 182,223 82.64%

2022 163,782 191,334 85.60%

2023 177,616 200,901 88.41%

2024 192,024 210,946 91.03%

2025 200,605 218,524 91.80%

2026 168,000 180,995 92.82%

2027 142,125 151,438 93.85%

2028 111,066 117,072 94.87%

2029 84,893 88,522 95.90%

2030 78,080 80,562 96.92%

2031 56,115 57,290 97.95%

2032 44,411 44,873 98.97%

2033 30,594 30,594 100.00%

2034 12,438 12,438 100.00%

2035 4,900 4,900 100.00%

2036 31,357 31,357 100.00%

2037 14,117 14,117 100.00%

PUBLIC SERVICE COMPANY OP NEW MEXICO PALO VERDE UNIT 2

($000)

Funding Fleer Curve Actual Findine Criteria Percent S Amount FundS Est. Cos

%Funded 80%

3.08%

877 1,096 28,499 3.85%

80%

6.18%

2,741 2,334 44,375 5.26%

80%

10.19%

4,749 3,691 46,594 7.92%

800/.

11.05%

5,405 4,117 48,923 8.42%

80%

12.32%

5,877 4,235 47,703 8.88%

80%

13.55%

6,788 8,479 50,088 16.93%

80%

14.67%

7,716 10,368 52,593 19.71%

80%!,

15.85%

9,488 14,528 59,869 24.27%

80%

17.50%

11,003 16,931 62,862 26.93%

80%/ 19.55%

12,905 18,040 66,005 27.33%

80%

21.62%

14,845 18,765 68,678 27.32%

80% 23.70%

17,088 21,329 72,112 29.58%

80°/

25.80%

19,535 26,333 75,717 34.78%

b01/0 27.9 0

Z J

,/y4 7

0i 80%

30.04%

25,077 81%

32.59%

28,570 82%

35.19%

32,391 83%

37.85%

36,575 84%

40.66%

41,253 85%

43.46%

46,304 86%

46.28%

51,769 8 7%

49.32%

57,933 88%

52.40%

64,633 89%

55.52%

71,897 90%

58.67%

79,779 91%

61.85%

88,311 92%

65.30%

97,897 93%

68.78%

108,272 94%

72.28%

119,460 95%

75.79%

131,532 96%

79.33%

144,565 97%

83.03%

158,868 98%

86.64%

174,064 99%

90.12%

190,104 100%

91.80%

200,605 100%

92.82%

168,000 100%

93.85%

142,125 1000/c 94.87%

111,066 100%

95.90%

84,893 100%/ 96.92%

78,080 100%

97.95%

56,115 100°/

98.97%

44,411 100% 100.00%

30,594 100%/. 100.00%

12,438 100% 100.00%

4,900 100% 100.00%

31,357 100% 100.00%

14,117 Exhdbit 3.4

Public Service Comany of New Mexico Palo Verde Unit 2 120.00% -

2004 Funding Status

$($000)

Percent 100.00%

Committed

$27,739 34.89%

Actual

$30,794 38.73%

Floor

$22,191 27.91%

80.00%

Committed Accumulations 60.00%

Actual Accumulations 40.00%

Funding Floor 20.00%

0.00%

I I I I I I

I I I

I I I I I I I

,cp Sp p

,66

-,N N'

,b 5b N

A 0,

z

, PK Cp I

f q, lb

'lb N

rlb b

-,O, "q

N le Ip Ip Ip Ip Ip Ip Ip

'PI 'PI , p 'p, p 01

Exhibit 3.4

PUBLIC SERVICE COMPANY OF NEW MEXICO PALO VERDE UNIT 3 (000) pundlu3 Plan Y=

Fund S Est Costs %Funded 1991 1,097 30.306 3.62%

1992 3,403 46.867 7.62%

1993 5,S95 49.211 11.98%

1994 6.712 51.671 12.99h 199S 7.799 53,63 14.48%

1996 9.009 56,556 15.93%

1997 10.238 59,384 17.24%

1998 1 1.992 64,372 18.63%

1999 13,903 67,590 20.57%

2000 16.309 70,970 22.93%

2001 17,703 69,668 25.41%

2002 20.380 73.151 27.86%

2003 23.296 76,808 30.33%

2004 26,461 80.649 32.81%

2005 29.909 84,681 35.32%

2006 33,646 SS,915 37.84%

2007 37,631 93,361 40.36%h 2008 42,035 98,029 42.88%

2009 46,54 102,931 45.52%

2010 51,964 108,077 48.08%

2011 57,421 113,481 50.60%

2012 63,522 1 19,155 53.31%

2013 70,063 125.113 S6.00%h 2014 77,061 131,369 58.66%

2015 S4.555 137,937 61 30%A 2016 92,563 144,834 63.91%

2017 101,S10 152,075 66.75%

2018 111,057 159,679 69.55%

2019 121,237 167,663 72.31%

2020 132,0S8 176,046 75.03%

2021 143,646 184,849 77.71%

2022 156,243 194,091 80.50%h 2023 169,415 203,796 83.13%

2024 183,193 213,985 85.61%

2025 193,312 224,077 86.27%

2026 194,478 221.906 87.64%

2027 177,912 199.878 S9.01%

2028 149,907 165,844 90.39'h 2029 114,916 125,235 91.76%

2030 85,S60 91,871 93.13%

2031 5 1,903 54,91 94.51%

2032 22,291 23,249 95.81%

2033 1,022 1,051 97.25%

2034 22,923 23,242 93.63%

2035 23,418 23,418 100.00'h 2036 31,357 31,357 100.00%

2037 14,117 14,117 100.00%A

=

Fuudhlo Flwor Curve Cri~

Sim 80%

2.90%

373 30%

6.10%

2,722 80%

9.58%

4,716 80%

10.39%h 5.370 80%

1 1.58%

6,239 80%

12.74%

7,208 80%

13.79%

S,190 S0%

14.90'h 9,594 S0%

16.46%

11,123 30%A 18.38%

13,047 30%

20.33%

14,162 30%

22.29%

16,304, 80%

24.26%

18,637 80'%

26.25%

21,169 30%/ 28.26%

23.928 S1%

30.65%

27,253 82%

33.100%

30,898 83%

35.59'h 34,889 84%

38.24%

39,357 85%

40.837 44,169 36%

43.52%

49,332 87%

46.33%

55,264 88%

49.23%

61,656 W9A 52.21%

63,584 90h 55.17%

76,100 91%

58.16%

84.233 92%

61.41%

93,390 93%

64.68%

103,283 94%

67.97%

113,963 95.% 71.28%

125,4S3 96%

74.60%

137,900 97%

78.09'h 151,556 98%

S1.47%

166,027 99h 84.75%

I18,361

100, 86.27%

193,312 100%

87.64%

194,478 100%

S9.01%

177,912 100'h 90.39'h 149.907 100%4 91.76%

114,916 100'h 93.13%

85,560 100%

94.51%

51.903 100'h 95.S8%

22,291 100%

97.25%

1,022 100'h 98.63%

22,923 100'h 100.00'h 23,418 100'h 100.00'h 31,357 100'A 100.00%

14,117 Actual Fundlng FundS Esl. Cos

% Fumnd 1,097 30,306 3.62%

2,335 46,867 4.98%

3,692 49,211 7.50%

4,117 51,671 7.970/.

4.235 53.863 7.86%

9,007 56,556 15.93%

10,228 59,384 17.22%

11,639 64,372 18.16%

16,377 67,590 24.23%

18,332 70,970 25.83%

18,985 69,668 27.25%

20,579 73,151 28.13%

23,094 76,808 30.07%

27,665 80,649 34.30t)i° Exhibit 3.4

Public Service Company of New Mexico Palo Verde Unit 3 120.00% -

2004 Funding Status S($000)

Percent 100.00%

Committed

$26,461 32.81%

Actual

$27,665 34.30%

Floor

$21,169 26.25%

80.00%

Committed Accumulations 60.00%

40.00%

Actual Accumulations Funding Floor 20.00%

0.0 I0%

I I I I l I I I I I I

I I

I I i i I I I I I (I:b

'N

'lb

'lb 11\\

A Cb N

A SP SO e

"N Nb

-, 'b N,

N lb b

A cb N

Nc§?,

Nq "q

rp bb n,

NI:P le IfP Ip IV ep CP Ip Ip 4,

'P,

,

41 'O,

'O P

P Exhibit 3.4

PUBLIC SERVICE COMPANY OF NEW MEXICO PALO VERDE UNITS 1. 2,3 (SThouwands) 2001 TLG Cost study Funding Plan Ftndt Floor Curve Atual Funding Year Fund S Est. Costs

%Funded CrIteria Peirent SAmount Fund S Est. Cost

%Funded 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 3,288 10.279 17,812 20,275 22,164 25.601 29.095 35,022 40,610 47,633 53,088 61,111 69.862 79,352 89,682 100.897 113,000 126.(KI 140,503 155,835 172,206 190,501 210,111 231,104 253,580 277,599 304,410 333,040 363,561 396,099 430.786 468,549 507,114 547.833 564,210 505,777 439,719 350,639 258,574 198.252 128.766 75,229 39,173 55.093 46,344 94,071 42.35 1

=

87.551 136,341 143,159 150,316 147,525 154,901 162,646 181,1 14 190,169 199,678 201,161 211.219 221,780 232.869 244,512 256,738 269,575 283,054 297,206 312,067 327,670 344,053 361,256 379,319 398,285 418,199 439.109 461,065 484,118 508,324 533.740 560.427 586,650 614,058 626,662 555,737 477.285 376,066 274,023 207,483 132,955 76.649 39.202 55,411 46,344 94,071 42,351 3.76%

7.54%/

12.44%

13.49%

15.02%

16.53%

17.89%

19.34%

21.35%

23.86%

26.39%

28.93%

31.50%/

34.08%

36.68%

39.30%

41.92%

U.54%

47.27%

49.94%

52.55%

55.37%

58.16%

60.93%

63.67%

66.38%

69.32%

72.23%

75.10%/0 77.92%

80.71%

83.61%

86.44%

89.22/o 90.03%

91.01%

92.13%

93.24%

94.36%

95.55%

96.85%

98. 15%

99.93%

99.43%

1 00.00°h 100.00h 100.00 80%h 3.00%h 2,630 80/o 6.03%

8,223 80°h 9.95%

14,250 80/

10.79h 16,220 80%

12.02%.

17,731 80%

13.22%

20,481 80%

14.31%

23.276 80° 15.47%

28,018 80%

17.08%

32,488 80%h 19.08%

38,107 80%

21.11%

42,470 80%h 23.15%

48,889 80%,S 25.20/

55.890 80%

27.26%

63.482 80°h 29.34%6 71,745 81%

31.83%

81,726 82%

34.370 92,660 83%

36,97/

104.631 84%

39.71%

118,022 85%

42.45%

132,459 86%

45.20%h 148.097 87%

48.17%/

165,736 88%

51.18° 184,898 89%

54.22°/

205,683 90%

57.30h 228,222 91%

60.41%

252,615 92°/

63.78°h 280,058 93%

67.18%/

309,727 94%

70.59%

341,748 95%

74.03%

376,294 96%

77.48%/s 413.555 97%

81.10°h 454,493 98°A 84.71%

496,972 99%

88.3r2 542,355 100%

90.03%

564,210 100%

91.01%

505,777 1 00%

92.13%

439.719 100%

93.24%

350,639 100°h 94.36%

258,574 100%

95.55%

198,252 100°h 96.85%

128,766 1 0h0 98.15%

75.229 100%'

99.93%

39.173 100/6 99.43%

55.093 100%6 100.00%

46.344 100%

100.00%/

94,071 100I 100,00h 42,351

=

3,289 87,551 7,003 136,341 11.074 143,159 12,351 150,316 12,705 147,525 25,581 154,901 30,594 162,646 40,312 181,114 51,77,3 190,169 55,901 199,678 57,284 201,161 61,965 211.219 74,418 221,780 87.772 232,869 0

0 0

3.76/

5.14%

7.74%

8.22%/

8.61%

16.51%

18.81%

22.26%

27.22'h 28.00%h 28.48/.

29.34%

33.55%

37.69%° Exhibft 3.4

Public Service Company of New Mexico Palo Verde Units 1, 2, and 3 120.00% -

2004 Funding Status

$(S000)

Percent 100.00%

Committed

$79,352 34.08%

Actual

$87,772 37.69%

Floor

$63,482 27.26%

80.00%

Committed Accumulations 60.00%

Actual Accumulations 40.00%-

20.00%

Funding Floor 0.00% 1 1 1 1 1 1 1 1 1 i 1 i 1 1 f d

l 1

t i

1 r

1 1

ii i

i i

1 lb N

I A

4 1

45 P F b

)

, b I

1

$p

,C.3O IRP Nq IIq If, e

T ID ID Exhibit 3.4

Palo Verde Nuclear Generating Station Appendix B, Tab 6 Units 1, 2, & 3 SCPPA 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Major Assumptions Escalation Factor Rate of Return Participation Ratio Funding Period Funding Level 6.00%

6.83%

5.91%

35 years for each unit Includes Independent Spent Fuel Storage Installation and Non-Nuclear Demolition Costs.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY Palo Verde Project - Termination Cost FUnding

.UNIT I UNIT12 UNIT 3 GRAND TOTAL pFRK)I)

CONlTKIOtlMON INTERtiS%

BALAE pER101 CO)NWIBITION DAIWE PERIOD CONTRll 'rrlN ItNEMLSr BAL CONTRIR9tTION lWFT TMA DEC31.

1990 10 JUN 30, 1991 11 DEC31.

1991 12 JUN 30, 1992 13

DEC31, 1992 14 JUN 30.

1993 Is

DEC31, 1993 16 JUN 30, 1994 17 DEC31.

1994 18 JUN 30, 1995 19 DEC 31, 1995 20 JUN 30.

1996 21 DEC 31, 1996 22 JUN 30, 1997 23 DEC 31, 1997 24 JUN 30, 1998 25 DEC 31, 1998 26 JUN 30, 1999 27 DEC 31, 1999 28 JUN 30, 2000 29 DEC 31, 2000 30 JUN 30.

2001 31

DEC31, 2001 32 JUN 30.

2002 33 DEC 31.

2002 34 JUN 30, 2003 35 DEC 31.

2003 36 JUN 30, 2004 37 lDFEC31 2004 38 JUN 30, 2005 39 DEC 31.

2005 40 JUN 30.

2006 41 DEC 31, 2006 42 JUN 30, 2007 43 DEC 31, 2007 44 JUN 30, 2008 45 DEC 31, 2008 46 JUN 30, 2009 47 DEC 31, 2009 48 so 0

0 0

0 1,240,620 1,240,620 1,239,380 1,240,620 1,654.160 827.080 1,240,620 1,239,380 1,239,380 1,241.860 I,240.620 1,240,620 1,240,620 1,240.620 1,240,620 1240,620 1,240.620 1,240.620 0

(219,415)

(219.415)

(219,415)

S625,326 363,880

-29,039 563,854 791,974 264.949 229.682 16,871 486,265 302,795 244,149 440,971 670,975 206,445 587,713 657,875 216,183 475.616 663,212 1,274.719 693,350 1,156,378 713,427 1.006,809 520.171 524,746 1,341.404 1.390.07 1 1,428,548 1,469,840 1.512,542 I,556,702 1,602,371 1.649,599 1.698,439 1.74S,948

,801,I82 1,855,199

$14,237,604 14,862,930 15,226,810 15.197,771 15,761,625 16,553,599 7.103,347 7,333,029 7,349,900 7,836,165 9,379,580 10,864,349 12,544,700 14,456295 16,316,900 17,731,693 19,630,188 21,085,751 22,800,747 24,705,819 27,221.158 29,155,128 31,552,126 33,506,173 35,753,602 37,514,393 39,279.759 40.704,872 41.831.572 43,040,705 44291.130 45.584,256 46,921,543 48,304,499 49,734,682 51,213,706 52,743,238 54,325,005 55,960,788 so 0

0 0

0 1,280.640 1,280,640 1,279,360 1,276,640 1,703,520 853,760 1,276,640 1,283,360 1,3 19,340 1,321.980 1,320,660 1,320,660 1,320,660 1,320,660 1,320,660 1,320,660 1,320,660 1,320,660 0

(92,915)

$1,117,240 443.094 147,301 623,452 711,934 593,006

-345,413 9,010 609,810 233,314 132,669 453,967 686,710 191,930 540,181 594,163 390,702 264,784 689,334 1,173,453 872,649 1,103,203 580,967 892,072 539,457 514,822 1,373.195 1,42 1,586 1,454,722 1,501228 1.549,322 1,599,058 1,650,493 1,703,684 1,758,692 1,S15,578 1,874,407 1,935,245

$14,387,900 1 5,505,140 15,948,234 16.095,535 16,718,987 17,430,921 7.962,403 7,616,990 7,626,000 8235,810 9,749,764 11,163,073 12,896,400 14,859,750 16,755,200 18,149,141 20,019,944 21,694.006 23,278.130 25,289,444 27.783,557 29,976,866 32,400,729 34,302,356 36,515,088 38,375,205 40,210,687 41,627,698 42,598,008 43.959,815 45,368,128 46,824,534 48,330,677 49,888,254 51,499,023 53,164,800 54,887,462 56,668,954 58,5 1,284

$0 0

0 0

0 1,480,740 1,480,740 1.479,260 1,480,740 1,974,320 987,160 1,480,740 1,479,260 1,439,280 1,442,160 1,440,720 1,440,720 1,440,720 1.440.720 1,440,720 1,440,720 1,440.720 1,440,720 0

(292,981)

(292.98I)

(292,981)

(292.981)

(292,981)

(292,98 1)

S15,396,791

$44,022,295

$1,440,621 16,837,412 S0

$3,183,187 47,205,482 385,474 17,222.886 0

1,192.448 48,397.930 297,481 17,520,367 0

415,743 48,813,673 933,298 18.453,665 0

2,120,604 50,934,277 1,081.178 19,534,843 0

2,585,086 53,519,363 168.679 7,830,305 0

1,026,634 22,896,055

-153,556 7,676,749 0

-269,287 22.626,768

-12,449 7.664,300 0

13.432 22,640,200 578,102 8,242,402 0

1,674,177 24,314,377 261,846 9,984,988 4.002,000 797,955 29,114,332

-19,451 11,446,277 4,002.000 357,367 33,473,699 411,663 13.337,200 3,998,000 1,306.601 38,778,300 682,114 15,500,054 3,998,000 2,039,799 44,816,099 142,126 17,616,500 5,332,000 540,501 50,688,600 726,204 19,329,864 2,668,000 1,854,098 55,210,698 593,888 21,404,492 3,998.000 1,845,926 61,054,624 366.650 23,250,402 4,002,000 973,535 66,030,159 471,854 25,161.536 3.998,000 1,212,254 71,240.413 731,960 27,335,656 4,006,000 2.084,506 77,330,919 1,340.511 30,116,887 4,002,000 3,788,683 85,121,602 800,274 32,357.881 4,002,000 2,366,273 91,489,875 1,419,469 35,218.070 4,002,000 3,679,051 99,170,925 821,429 37.480,219 4,002,000 2,115,822 105,288.748 1,110,978 40,031,917 4,002,000 3.009,859 112,300,607 656,148 42,128,785 4.002,000 1,715,776 1 18.018,383 602307 44,171,813 4,002,000 1,641,876 123,662,258 1,508,467 45,811,926 4,002.000 4,223,066 128,144.497 1,564,477 46,984,800 4,376,135 131,414,381 1,604,531 48,296,351 (605,311) 4,487,801 135,296,871 1,649,320 49,652,690 (605,311) 4,620,388 139,311,948 1,695,639 51.055,349 (605,311) 4,757,503 143,464,139 1,743,540 52,505,908 (605,311) 4,899,300 147,758,128 1.793.077 54,006,004 (605,311) 5,045,940 152,198,757 1,844,305 55,557,329 (605,311) 5,197,588 156,791,034 1,897,283 57,161,631 (60S,311) 5,354.414 161,540,136 1,952,070 58,820,720 (605,31I) 5,516,596 166,451,421 2,008,728 60,536,467 (605,311) 5,684,316 171,530,426 2,067,320 62,310,806 (603,311) 5,857,764 176.782,878 Page 10

Palo Verde Project - Termination Cost Funding UNIT I UNIT2 UNIT 3 GRAND TOTAL PEDR)

CODNTRMMON INTERSE BAIAiIE PRO CONT0MIM NTERST HAtAM E 1ERMIN INEBMSI TOAI JUN 30, 2010 49 DEC31.

2010 50 JUN 30, 2011 St

DEC31, 2011 52 JtN 30, 2012 53 DEC 31, 2012 54 JUN 30, 2013 55 DEC 31.

2013 56 JUN 30, 2014 57 DEC31.

2014 58 JUN 30, 2015 59 DEC 31, 2015 60 JUN 30, 2016 61 DEC31.

2016 62 JUN 30, 2017 63 DEC31.

2017 64 JUN 30, 2018 65 DEC31.

2018 66 JUN 30, 2019 67 DEC 31.

2019 68 JUN 30, 2020 69 DEC 31, 2020 70 JUN 30, 2021 DEC 31, 2021 JUN 30, 2022

DEC31, 2022 (219.415)

(219,415)

(219.415)

(219,415)

(219.415)

(219,415)

(219,415) 1,911,061 1,968.831 2.028,573 2,090,356 2,154,248 2,220.323 2,288,654 2.359,319 2,432,396 2,507,970 2,586,124 2,666,947 2,750,530 2.836,967 2,926,357 3,018.799 3,114,398 3,213,262 3,315,501 3,421,233 3,530,575 3,643.651 57,652,434 47 59,401,849 48 61.211.007 49 63,081.947 50 65.016,780 51 67.017,688 52 69,086,926 53 71,226,830 54 73,439,810 55 75.728,365 56 78,095,073 57 80,542,604 5R 83,073,719 59 85,691,271 60 88,398,212 61 91.197.596 62 94,092,578 63 97.086,424 64 100.182,510 65 103,384,328 66 106,695.487 67 110.119,723 68 69 70 (92,915)

(92,915)

(92.915)

(92,915)

(92.915)

(92,915)

(92.915)

(92,915)

(92,915) 1.99I.160 2,063,224 2,130,511 2200,094 2,272,055 2,346,472 2,423,431 2,503,01S 2,585,323 2,670,439 2,758,462 2,849,490 2.943.627 3,040,979 3.141,655 3,245,770 3,353,440 3,464,787 3,579,936 3,699,018 3,822,166 3,949,520 4,081,223 4,217,424 60,416,529 62,386,838 64.424,434 66,531.613 68.710,753 70,964,310 73,294,826 75,704.929 78,197,337 80,774,861 83,440,408 86,196,983 S9,047,694 91,995,758 95,044,498 98,197,353 101.457.877 104,829.749 108,316,769 111,922,872 115,652,123 119,508,728 123.497,036 127,621.544 45 (292,981) 46 (292,981) 47 (292,981) 48 (292,981) 49 (292.981) 50 (292,981) 51 (292,981) 52 (292,981) 53 (292,981) 54 (292,98 1) 55 (292,981) 56 (292,981) 57 (292,9S1) 58 (292.981) 59 (292,981) 60 (292,981) 61 (292.981) 62 (292,981) 63 (292,981) 64 (292,981) 65 (292,981) 66 (292,981) 67 (292,981) 68 (292.981) 69 (292,981) 70 (292,981) 2,127,914 64,145,740 2,190,577 66,043,336 2,255,380 68,005,735 2,322,396 70,035,151 2,391,700 72,133,870 2,463,372 74,304,261 2,537,491 76,548.771 2,614,141 78,869,931 2,693,408 81,270,358 2,775,383 83,752,760 2,860.157 86,319,936 2,947,826 88,974,781 3,038,489 91,720.290 3,132,248 94,559,557 3,229,209 97,495,785 3,329,481 100,532,285 3,433,178 103,672,482 3,540,415 106,919.917 3,651,315 110,278,251 3,766,002 113,751,273 3,884,606 117,342,898 4,007,260 121,057,177 4,134,103 124,898,299 4,265,277 128,870.595 4,400,931 132.978,545 4,541,217 137,226,782 (605,311) 6,037,135 182,214.703 (605,311) 6,222,632 187,832.023 (605,311) 6,414,464 193,641,176 (605,311) 6,612,846 I99,648,711 (605.311) 6,818,003 205,861,403 (605,311) 7,030.167 212,286,259 (605,311) 7,249,576 218,930.523 (605,311) 7,476,477 225,801,689 (605,311) 7,711,128 232.907,506 (605,311) 7,953,791 240,255,986 (605.311) 8,204,742 247,855,417 (605,311) 8,464,262 255,714,368 (6053!1) 8,732.646 263,841,703 (605,311) 9,010,194 272,246,586 (605,311) 9,297,221 280,938,495 (605,311) 9.594,050 289,927,234 (605,311) 9,901,015 299,222,937 (605,311) 10,218,463 308,836,090 (605,311) 10.546,752 318,777,531 (605,311) 10.886,253 329,058,472 (605,311) 11,237,347 339,690.508 (605,311) 11,600,431 350,685,628 (385,896) 8.215,326 248,395,335 (385,896) 8,482,701 256,492.140 (292,981) 4,400,931 132,978,545 (292,981) 4,541,217 137,226,782 Page I I

SCPPA PALO VERDE UNIT 1 FUNDING PLAN 100%

90%

80%

70%

D 60%

az

- 50%

zw0 0.

30%

20%

10%

0%

1991 1994 1997 2000 2003 2006 2009 YEAR 2012 2015 2018 2021 2024 Page 12

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY 2004 PALO VERDE UNIT -1 FUNDING STATUS TERMINATION COST FUNDING (S THOUSAND)

(I) - (2 x 3)

(2)

(3)

AUTHORIZED FUNDING PLAN YEAR FUND EST. COST

%FUNDED (4)

(5) = (3 x 4)

(6) = (I x 4)

FUNDING FLOOR CURVE CRITERIA PERCENT AMOUNT (7)

(8) = (2)

(9) - (7 / 8)

ACTUAL FUNDING FUND EST. COST

%FUNDED DEC 1991 DEC 1992 DEC 1993 DEC 1994 DEC 1995 DEC 1996 DEC 1997 DEC 1998 DEC 1999 DEC 2000 DEC 2001 DEC 2002 DEC 2003 IDEC 2004 DEC 2005 DEC 2006 DEC 2007 DEC 2008 DEC 2009 DEC 2010 DEC 2011 DEC 2012 DEC 2013 DEC 2014 DEC 2015 DEC 2016 DEC 2017 DEC 2018 DEC 2019 DEC 2020 DEC 2021 DEC 2022 DEC 2023 DEC 2024 DEC 2025

$4,225 5,176 6,782 7,597 7,190 9,033 10,771 13,181 15,369 17,032 18,562 20,833 23,310 26,009 28,948 32,146 35,624 38,856 42,927 46,733 51,492 55,963 60,786 65,986 71,591 77,631 80,431 86,826 93,665 114,288 120,002 126,003 132,303 138,918 145,864

$16,565 26,915 28,530 30,242 26,629 28,227 29,920 32,953 34,930 37,026 36,396 38,580 40,895 43,348 45,949 48,706 51,629 54,726 58,010 61,490 65,180 69,091 73,236 77,630 82,288 87,225 92,459 98,006 103,887 110,120 115,626 121,407 127,478 133,852 140,544 26%

19%

24%

25%

27%

32%

36%

40%

44%

46%

51%

54%

57%

60%

63%

66%

69%

71%

74%

76%

79%

81%

83%

85%

87%

89%

91%

93%

95%

100%

80%

81%

82%

83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

95%

100%

20%

15%

19%

20%

21%

25%

29%

32%

35%

37%

40%

43%

46%

48%

51%

54%

57%

60%

63%

65%

68%

71%

74%

77%

80%

82%

85%

88%

91%

100%

$3,380 4,141 5,426 6,078 5,752 7,226 8,617 10,545 12,295 13,626 14,850 16,666 18,648 20,807 23,448 26,360 29,568 32,639 36,488 40,190 44,798 49,248 54,099 59,387 65,147 71,420 74,801 81,616 88,982 114,288 120,002 126,003 132,303 138,918 145,864

$15,227 15,762 7,103 7,350 9,380 12,545 16,317 19,630 22,801 27,221 31,552 35,754 39,280 41,832

$16,565 26,915 28,530 30,242 26,629 28,227 29,920 32,953 34,930 37,026 36,396 38,580 40,895 43,348 92%

59%

25%

24%

35%

44%

55%

60%

65%

74%

87%

93%

96%

97% 7 Page 13

SCPPA PALO VERDE UNIT 2 FUNDING PLAN 1090% -

80%-80%_1 ACTU AL J__CC MIV ITT ED_ ___

70%_

w 60%

5 50%

FO-w iLi 40%

a.

Jar.2004 FUNDING STATUS 30% -AMOUNT PERCEN COMMITTED

$29,858,000 63%

2 ACTUAL

$42,598,000 90%

10%

FLOOR

$23,886,000 500° 0%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 YEAR Page 14

SOUTHERN CALIFORNIA PUBLIC POWVER AUTHORITY 2004 PALO VERDE UNIT - 2 FUNDING STATUS TERMINATION COST FUNDING (S THOUSAND)

(1) -(2x3)

(2)

(3)

(4)

(5) -(3x4)

(6)=(I x4)

(7)

(8)-(2)

(9)-(718)

AUTHORIZED FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING YEAR FUND EST. COST

%FUNDED CRITERIA PERCENT AMOUNT FUND EST. COST

%FUNDED DEC 1991

$3,966

$16,423 24%

80%

19%

$3,173

$15,948

$16,423 97%

DEC 1992 4,932 26,483 19%

80%

15%

3,946 16,719 26,483 63%

DEC 1993 6,548 28,072 23%

80%

19%

5,238 7,962 28,072 28%

DEC 1994 8,515 29,756 29%

80%

23%

6,812 7,626 29,756 26%

DEC 1995 8,568 27,640 31%

80%

25%

6,855 9,750 27,640 35%

DEC 1996 10,254 29,298 35%

80%

28%

8,204 12,896 29,298 44%

DEC 1997 12,112 31,056 39%

80%

31%

9,690 16,755 31,056 54%

DEC 1998 14,916 34,689 43%

80%

34%

11,933 20,020 34,689 58%

DEC 1999 17,282 36,770 47%

80%

37%

13,825 23,278 36,770 63%

DEC 2000 19,488 38,976 50%

80%

40%

15,590 27,784 38,976 71%

DEC 2001 21,090 39,793 53%

80%

43%

16,872 32,401 39,793 81%

DEC 2002 24,043 42,180 57%

80%

45%

19,234 36,515 42,180 87%

DEC 2003 26,827 44,711 60%

80%

48%

21,461 40,211 44,711 90%

DEC 2004 29,858 47,394 63%

80%

50%

23,886 42,598 47,394 90%

DEC 2005 33,157 50,237 66%

80%

53%

26,525 DEC 2006 36,211 53,252 68%

81%

55%

29,331 DEC 2007 40,077 56,447 71%

82%

58%

32,863 DEC 2008 44,277 59,834 74%

83%

61%

36,750 DEC 2009 48,202 63,424 76%

84%

64%

40,490 DEC 2010 53,111 67,229 79%

85%

67%

45,144 DEC 2011 57,723 71,263 81%

86%

70%

49,642 DEC 2012 62,697 75,538 83%

87%

72%

54,546 DEC 2013 68,060 80,071 85%

88%

75%

59,893 DEC 2014 73,841 84,875 87%

89%

78%

65,719 DEC 2015 80,971 89,968 90%

90%

81%

72,874 DEC 2016 87,736 95,366 92%

91%

83%

79,840 DEC 2017 95,022 101,088 94%

92%

86%

87,421 DEC 2018 101,795 107,153 95%

93%

89%

94,670 DEC 2019 110,175 113,582 97%

94%

91%

103,564 DEC 2020 119,193 120,397 99%

95%

94%

113,233 DEC 2021 127,621 127,621 100%

100%

127,621 DEC 2022 134,002 134,002 100%

100%

134,002 DEC 2023 140,702 140,702 100%

100%

140,702 DEC 2024 147,737 147,737 100%

100%

147,737 DEC 2025 155,124 155,124 100%

100%

155,124 DEC 2026 162,880 162,880 100%

100%

162,880 Page 15

SCPPA PALO VERDE UNIT 3 FUNDING PLAN awaz usz Iita-100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1991 1994 1997 2000 2003 2006 2009 YEAR 2012 2015 2018 2021 2024 2027 Page 16

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY 2004 PALO VERDE UNIT -3 FUNDING STATUS TERMINATION COST FUNDING (S THOUSAND)

(I) - (2 x 3)

(2)

(3)

(4)

(5) - (3 x 4)

(6)- (I x4)

(7)

(8) - (2)

(9) = (7 / S)

AUTHORIZED FUNDING PLAN FUNDING FLOOR CURVE ACTUAL FUNDING YEAR FUND EST. COST

%FUNDED CRITERIA PERCENT AMOUNT FUND EST. COST

%FUNDED DEC 1991

$3,098 DEC 1992 4,125 DEC 1993 5,769 DEC 1994 8,375 DEC 1995 9,051 DEC 1996 10,917 DEC 1997 12,624 DEC 1998 14,919 DEC 1999 17,396 DEC 2000 19,697 DEC 2001 20,183 DEC 2002 22,678 DEC 2003 25,399 DEC 2004 28,365 DEC 2005 31,596 DEC 2006 34,572 DEC 2007 38,364 DEC 2008 41,880 DEC 2009 46,323 DEC 2010 50,466 DEC 2011 54,940 DEC 2012 60,535 DEC 2013 65,792 DEC 2014 71,461 DEC 2015 77,574 DEC 2016 84,164 DEC 2017 90,239 DEC 2018 97,827 DEC 2019 106,001 DEC 2020 114,804 DEC 2021 122,987 DEC 2022 137,227 DEC 2023 144,089 DEC 2024 151,293 DEC 2025 158,858 DEC 2026 166,801 DEC 2027 175,141

=

$18,225 28,298 29,996 31,796 31,209 33,082 35,066 37,298 39,536 41,908 40,366 42,788 45,355 48,077 50,961 54,019 57,260 60,696 64,338 68,198 72,290 76,627 81,225 86,098 91,264 96,740 102,544 108,697 115,219 122,132 129,460 137,227 144,089 151,293 158,858 166,801 175,141 17%

15%

19%

26%

29%

33%

36%

40%

44%

47%

50%

53%

56%

59%

62%

64%

67%

69%

72%

74%

76%

79%

81%

83%

85%

87%

88%

90%

92%

94%

95%

100%

80%

81%

82%

83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

100%

=

14%

$2,478 12%

3,300 15%

4,615 21%

6,700 23%

7,240 26%

8,734 29%

10,099 32%

11,935 35%

13,917 38%

15,757 40%

16,146 43%

18,142 45%

20,319 47%

22,692 49%

25,277 52%

27,658 54%

30,691 56%

33,923 59%

37,985 62%

41,887 64%

46,150 67%

51,455 69%

56,581 72%

62,171 74%

68,266 77%

74,906 80%

81,215 82%

89,023 85%

97,521 87%

106,768 90%

115,608 100%

137,227 100%

144,089 100%

151,293 100%

158,858 100%

166,801 100%

175,141 S17,223

$18,225 18,454 28,298 7,830 29,996 7,664 31,796 9,985 31,209 13,337 33,082 17,617 35,066 21,404 37,298 25,162 39,536 30,117 41,908 35,218 40,366 40,032 42,788 44,172 45,355 46.985 48.077 95%

65%

26%

24%

32%

40%

50%

57%

64%

72%

87%

94%

97%

98%1 Page 17

SCPPA PALO VERDE ALL UNITS FUNDING PLAN 90%

A(

TU XCOCMMTED

$8,2200 6E 80%

L CUL

$3,1,0 5

70 0

A z

Li.

wC.

wa4%.

2004 FUNDING STATUS--

0OX AMOUNT PERCENT COMMITTED

$84,232,000 61%

20%

ACTUAL

$131,414,000 95%

FLOOR

$67,386,000 48%

10%

19-4 1

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 YEAR Page 18

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY 2004 PALO VERDE ALL UNITS FUNDING STATUS TERMINATION COST FUNDING (IN THOUSANDS)

(1) - (2 x 3)

(2)

(3)

AUTHORIZED FUNDING PLAN YEAR FUND EST. COST

%FUNDED (4)

(5) -(3x4)

(6)=(1 x4)

FUNDING FLOOR CURVE CRITERIA PERCENT AMOUNT (7)

(8) - (2)

(9) - (7 / 8)

ACTUAL FUNDING FUND EST. COST

%FUNDED DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

$11,289 14,233 19,099 24,487 24,809 30,204 35,507 43,016 50,047 56,217 59,835 67,554 75,536 84,232 93,701 102,929 114,065 125,013 137,452 150,310 164,155 179,196 194,638 211,288 230,136 249,531 265,692 286,448 309,841 348,285 370,610 397,232 417,093 437,948 459,845 329,681 175,141

$51,213 81,696 86,598 91,794 85,478 90,607 96,043 104,939 111,236 117,910 116,555 123,548 130,961 138,819 147,148 155,977 165,336 175,256 185,771 196,917 208,732 221,256 234,532 248,603 263,520 279,331 296,091 313,856 332,688 352,649 372,707 392,636 412,268 432,882 454,526 329,681 175,141 22%

17%

22%

27%

29%

33%

37%

41%

45%

48%

51%

55%

58%

61%

64%

66%

69%

71%

74%

76%

79%

81%

83%

85%

87%

89%

90%

91%

93%

99%

101%

100%

80%

81%

82%

83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

95%

96%

97%

100%

18%

14%

18%

21%

23%

26%

30%

33%

36%

38%

41%

44%

46%

48%

51%

54%

57%

60%

63%

66%

68%

71%

74%

77%

79%

82%

85%

87%

90%

94%

95%

100%

$9,031 11,386 15,279 19,590 19,847 24,163 28,406 34,413 40,037 44,973 47,868 54,043 60,429 67,386 75,250 83,349 93,122 103,311 114,963 127,222 140,589 155,249 170,574 187,277 206,287 226,166 243,436 265,309 290,067 334,289 363,231 397,232 417,093 437,948 459,845 329,681 175,141

$48,398 50,935 22,895 22,640 29,115 38,778 50,689 61,054 71,240 85,122 99,171 112,301 123,663 131,414

$51,213 81,696 86,598 91,794 85,478 90,607 96,043 104,939 111,236 117,910 116,555 123,548 130,961 138,819 95%

62%

26%

25%

34%

43%

53%

58%

64%

72%

85%

91%

94%

95%I Page 19

Palo Verde Nuclear Generating Station Appendix B, Tab 7 Units 1, 2, & 3 LADWP 2004 Annual Funding Status Report Section 2.1.7 [Restated]

Summary of Major Assumptions Escalation Factor Rate of Return Participation Ratio Funding Period Funding Level 5.0%

7.0%

5.7%

35 years for each unit Includes Water Reclamation Facility and 25% Contingency factor

Department of Water & Power Palo Verde Project Termination Cost Funding I

Unit I II Unit 2 1I Unit 3 1 1 GrandTotal I

Period Contribution Interest Balance Contribution Interest Totals DatI Period Contnbution Interest Blance eni Contribution Interest Balance IL 12/31/1990 6/30/1991 12/31/1991 6/30/1992 12/31/1992 6/30/1993 12/31/1993 6/30/1994 12/31/1994 6/30/1995 12/31/1995 6/30/1996 12/31/1996 6/30/1997 12/31/1997 6/30/1998 12/31/1998 6/30/1999 12/31/1999 6/30/2000 12/31/2000 6/30/2001 12/31/2001 6/30/2002 12/31/2002 6/30/2003 12/31/2003 6/30/2004 12/31/2004 6/30/2005 12/31/2005 6/30/2006 12/31/2006 6/30/2007 12/31/2007 6/30/2008 223,326 223,326 223,326 434,027 445,545 431,919 431,919 431,919 431,919 1,755,562 1,755,562 1,593,396 1,593,396 1,593,396 1,593,396 1,593,396 1,629,218 0

0 0

(118,803)

(118,803) 2,444,200 106,706 2,774,232 428,941 3,426,499 116,869 3,766,694 104,872 4,305,593 90,854 4,841,992 87,753 5,361,664 111,532 5,905,115 (131,334) 6,205,700 404,898 7,042,517 262,538 9,060,617 260,302 11,076,481 258,223 12,928,100 247,064 14,768,560 565,873 16,927,829 738,933 19,260,158 996,208 21,849,762 (214,470) 23,264,510 211,345 23,475,855 852,897 24,328,752 1,765,642 26,094,394 1,044,753 27,139,147 875,812 28,014,959.

766,833 28,781,792 1,140,274 29,922,067 538,487 30,460,554 300,726 30,761,280 64,765 30,826,045 941,281 31,767,326 1,111,856 32,760,379 1,146,613 33,788,189 1,182,587 34,851,972 1,219,819 35,952,988 1,258,355 37,092,539 1,298,239 38,271,975 1,339,519 39,492,691 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 232,478 232,478 232,478 423,694 421,072 414,884 414,884 414,884 414,884 1,669,739 1,669,739 1,753,112 1,753,112 1,753,112 1,753,112 1,753,112 1,750,953 0

0 0

105,780 490,438 111,934 129,716 173,551 93,888 10,343 (120,146) 339,916 235,585 197,615 211,610 238,202 583,850 794,564 653,844 113,871 346,764 804,598 1,536,294 951,085 971,149 764,694 1,152,070 697,317 133,416 2,159,244 2,497,502 3,220,418 3,564,830 4,118,240 4,712,863 5,221,635 5,646,862 5,941,600 6,696,400 8,601,724 10,469,078 12,433,800 14,425,114 16,762,076 19,309,752 21,716,708 23,581,532 23,928,296 24,732,894 26,269,187 27,220,272 28,191,422 28,956,116 30,108,186 30,805,503 30,938,919 30,983,422 31,679,829 32,785,386 33,929,638 35,113,938 36,339,689 37,608,341 38,921,397 40,280,408 6

7 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 270,890 270,890 270,890 464,724 477,502 462,987 462,987 462,987 462,987 1,884,499 1,884,499 1,963,492 1,963,492 1,963,492 1,963,492 1,963,492 1,929,829 0

0 0

1,493,407 71,900 1,836,197 432,437 2,539,524 77,462 2,887,876 84,937 3,437,537 111,010 4,026,049 52,475 4,541,511 47,978 5,052,476 (159,863) 5,355,600 295,915 6,114,502 181,886 8,180,887 152,131 10,217,517 150,991 12,332,000 184,812 14,480,304 399,527 16,843,323 549,326 19,356,141 511,371 21,831,004 (245,280) 23,515,553 316,063 23,831,616 778,362 24,609,978 1,623,514 26,233,492 1,117,369 27,350,861 1,069,950 28,420,811 687,677 29,108,488 832,779 29,941,267 600,265 30,541,532 159,788 30,701,320 69,003 30,770,323 963,229 31,733,552 0

0 6,096,851 726,694 284,386 7,107,931 726,694 1,351,816 9,186,441 726,694 306,265 10,219,400 1,322,445 319,525 11,861,370 1,344,119 375,415 13,580,904 1,309,790 234,116 15,124,810 1,309,790 169,853 16,604,453 1,309,790 (411,343) 17,502,900 1,309,790 1,040,729 19,853,419 5,309,800 680,009 25,843,228 5,309,800 610,048 31,763,076 5,310,000 620,824 37,693,900 5,310,000 670,078 43,673,978 5,310,000 1,549,250 50,533,228 5,310,000 2,082,823 57,926,051 5,310,000 2,161,423 65,397,474 5,310,000 (345,879) 70,361,595 0

874,172 71,235,767 0

2,435,856 73,671,623 0

4,925,450 78,597,074 0

3,113,207 81,710,280 0

2,916,911 84,627,192 0

2,219,205 86,846,396 0

3,125,123 89,971,520 0

1,836,069 91,807,589 0

593,930 92,401,519 0

178,271 92,579,789 0

2,600,917 95,180,707 (136,697) 3,331,325 98,375,334 (136,697) 3,443,137 101,681,774 (136,697) 3,558,862 105,103,938 (136,697) 3,678,638 108,645,879 (136,697) 3,802,606 112,311,788 (136,697) 3,930,913 116,106,003 (136,697) 4,063,710 120,033,016

=

0 44,503 0

696,407 (3,237) 1,108,794 (3,237) 1,147,489 (3,237) 1,187,537 (3,237) 1,228,988 (3,237) 1,271,889 (3,237) 1,316,292 (3,237) 1,362,249 (14,657) 1,110,674 32,829,569 (14,657) 1,149,035 33,963,947 (14,657) 1,188,738 35,138,028 (14,657) 1,229,831 36,353,202 (14,657) 1,272,362 37,610,907 (14,657) 1,316,382 38,912,632 (14,657) 1,361,942 40,259,917 Page 10

Department of Water & Power Palo Verde Project Termination Cost Funding I

Unit I I

Unit 2 DM Period Contribution note DBalance PeAd Contfribution Interest Unit 3 Grand Total Contribution Interest Totals

[

Balance Period Contribution Interest Balance 12/31/2008 6/30/2009 12/31/2009 6/30/2010 12/31/2010 6/30/2011 12/31/2011 6/30/2012 12/31/2012 6/30/2013 12/31/2013 6/30/2014 12/31/2014 6/30/2015 12/31/2015 6/30/2016 12/31/2016 6/30/2017 12/31/2017 6/30/2018 12/31/2018 6/30/2019 12/31/2019 6/30/2020 12/31/2020 6/30/2021 12/31/2021 6/30/2022 12/31/2022 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 (118,803)

(118,803)

(118,803) 1,382,244 1,426,465 1,472,233 1,519,603 1,568,631 1,619,375 1,671,895 1,726,253 1,782,514 1,840,744 1,901,011 1,963,389 2,027,949 2,094,769 2,163,928 2,235,507 2,309,592 2,386,270 2,465,631 2,547,770 2,632,784 2,720,773 2,811,842 2,906,099 3,003,654 40,756,131 42,063,793 43,417,222 44,818,022 46,267,849 47,768,421 49,321,512 50,928,962 52,592,672 54,314,612 56,096,821 57,941,406 59,850,552 61,826,518 63,871,643 65,988,347 68,179,136 70,446,602 72,793,430 75,222,397 77,736,378 80,338,348 83,031,386 85,818,682 88,703,533 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 (3,237) 1,409,814 (3,237) 1,459,045 (3,237) 1,509,998 (3,237) 1,562,734 (3,237) 1,617,317 (3,237) 1,673,810 (3,237) 1,732,280 (3,237) 1,792,796 (3,237) 1,855,431 (3,237) 1,920,258 (3,237) 1,987,353 (3,237) 2,056,797 (3,237) 2,128,672 (3,237) 2,203,062 (3,237) 2,280,056 (3,237) 2,359,745 (3,237) 2,442,222 (3,237) 2,527,587 (3,237) 2,615,939 (3,237) 2,707,384 (3,237) 2,802,029 (3,237) 2,899,987 (3,237) 3,001,373 (3,237) 3,106,308 (3,237) 3,214,915 (3,237) 3,327,324 41,686,986 43,142,793 44,649,554 46,209,052 47,823,132 49,493,704 51,222,747 53,012,307 54,864,500 56,781,521 58,765,637 60,819,198 62,944,633 65,144,458 67,421,277 69,777,785 72,216,770 74,741,121 77,353,823 80,057,970 82,856,762 85,753,512 88,751,648 91,854,718 95,066,397 98,390,484 42 (14,657) 1,409,097 41,654,357 43 (14,657) 1,457,902 43,097,602 44 (14,657) 1,508,416 44,591,361 45 (14,657) 1,560,698 46,137,402 46 (14,657) 1,614,809 47,737,554 47 (14,657) 1,670,814 49,393,712 48 (14,657) 1,728,780 51,107,834 49 (14,657) 1,788,774 52,881,952 50 (14,657) 1,850,868 54,718,163 51 (14,657) 1,915,136 56,618,642 52 (14,657) 1,981,652 58,585,637 53 (14,657) 2,050,497 60,621,477 54 (14,657) 2,121,752 62,728,572 55 (14,657) 2,195,500 64,909,415 56 (14,657) 2,271,830 67,166,587 57 (14,657) 2,350,831 69,502,761 58 (14,657) 2,432,597 71,920,701 59 (14,657) 2,517,225 74,423,268 60 (14,657) 2,604,814 77,013,426 61 (14,657) 2,695,470 79,694,238 62 (14,657) 2,789,298 82,468,880 63 (14,657) 2,886,411 85,340,633 64 (14,657) 2,986,922 88,312,899 65 (14,657) 3,090,951 91,389,193 66 (14,657) 3,198,622 94,573,158 67 (14,657) 3,310,061 97,868,561 68 (14,657) 3,425,400 101,279,304 69 (14,657) 3,544,776 104,809,423 70 (14,657) 3,668,330 108,463,096 (136,697)

(136,697)

(17,894)

(14,657)

(14,657) 4,201,156 124,097,474 4,343,412 128,304,189 4,490,647 132,658,138 4,643,035 137,164,476 4,800,757 141,828,535 4,963,999 146,655,837 5,132,954 151,652,094 5,307,823 156,823,220 5,488,813 162,175,335 5,676,137 167,714,775 5,870,017 173,448,095 6,070,683 179,382,081 6,278,373 185,523,757 6,493,331 191,880,391 6,715,814 198,459,507 6,946,083 205,268,893 7,184,411 212,316,607 7,431,081 219,610,991 7,686,385 227,160,679 7,950,624 234,974,605 8,224,111 243,062,019 8,507,171 251,432,493 8,800,137 260,095,933 9,103,358 269,062,593 9,417,191 278,343,087 6,637,384 196,259,045 6,869,067 203,110,217 3,544,776 104,809,423 3,668,330 108,463,096 0

(3,237) 3,443,667 101,830,913 Page 11

DWP PALO VERDE UNIT 1 FUNDING PLAN 10 COMMnTD FLOOR A

90%

1 70%-

60% -

40% --

U 40%/X,1rt__

2004 FUNDING STATUS 30% -AMOUNT PERCENT 20%.

COMMIllED 22,350 55%

ACWAL 31,767 78%

10/

__-lFLOOR 17,880 44%

1991 1994 1997 2MM00 200?

2DM 2009 2012 2015 2018 2021 2024

_VVV VW

_VVV Year Page 12

DEPARTMENT OF WATER & POWER 2001 PALO VERDE UNIT 1 FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1) 2 (3)

Authorized Funding Plan Eu-nd EstCost % Funded (2) X (3)

(4)

(5)

(6)

Funding Floor Curve Criteri Perent A

(3) X (4)

(1) X (4)

(7)

(8)

(9)

Actual Funding Eimd Est Cost

% Funded (7)/(8)

Month Y&K DEC 1991 DEC 1992 DEC 1993 DEC 1994 DEC 1995 DEC 1996 DEC 1997 DEC 1998 DEC 1999 DEC 2000 DEC 2001 DEC 2002 DEC 2003 DEC 2004 DEC 2005 DEC 2006 DEC 2007 DEC 2008 DEC 2009 DEC 2010 DEC 2011 DEC 2012 DEC 2013 DEC 2014 DEC 2015 DEC 2016 DEC 2017 DEC 2018 DEC 2019 DEC 2020 DEC 2021 DEC 2022 DEC 2023 DEC 2024 DEC 2025 3,261 15,677 4,330 25,832 5,513 27,124 6,780 28,480 6,934 25,682 8,3S9 26,966 9,627 28,314 11,759 31,782 13,348 33,371 15,067 35,040 16,924 36,792 18,060 36,858 20,124 38,701 22,350 40,636 24,747 42,668 27,329 44,801 30,106 47,041 33,093 49,393 35,785 51,863 39,208 54,456 42,884 57,179 46,829 60,038 51,062 63,040 54,939 66,192 59,771 69,501 64,949 72,976 70,495 76,625 75,629 80,456 81,945 84,479 88,703 88,703 93,138 93,138 97,795 97,795 102,685 102,685 107,819 107,819 3,210 113,210 21%

17%

20%

24%

27%

31%

34%

37%

40%

43%

46%

49%

52NO 55%

58%

61%

64%

67%

69%

72r/

75%

780/

81%

83%

86%

89%

9r/a 94%

97%

100%

1000/%

100%

1000/a 100%

800/a 80%

80/

800/

8W0/o 800/

800/

800/c 800/

800/a 81%

82%

83%

84%

85%

86%

87Ya 88%

89%

900/a 91%

92%

93%

94%

95%

96%

97%

98%

99%

1000/

100%

17%

13%

16%

19%

22%

25%

27%

300/a 32%

34%

37%

39%

42%

44%

47%

500/0 53%

56%

59%

62%

65%

69%

72%

75%

78%

820/a 86%

88%

92%

96%

97%-

98%

99%

100%

=

2,609 3,464 4,410 5,424 5,547 6,688 7,702 9,407 10,679 12,054 13,539 14,448 16,100 17,880 20,045 22,410 24,988 27,799 30,418 33,719 37,309 41,210 45,445 49,445 54,392 59,753 65,560 71,091 77,848 85,155 90,344 95,839 101,658 107,819 113,210 3,426 15,677 4,306 25,832 5,362 27,124 6,206 28,480 9,061 25,682 12,928 26,966 16,928 28,314 21,850 31,782 23,476 33,371 26,094 35,040 28,015 36,792 29,922 36,858 30,761 38,701 31,767 40,636 22%

17%

20%

22%

35%

48%

60%

69%

70%/a 74%

76%

81%

79%

78%I.

Page 13

DWP PALO VERDE UNIT 2 FUNDING PLAN

.100%

I COMMiITED _

FLOOR -*-ACEL 9

0; -

I I

1AX0 70%

U 40% ---

__l v4

/2004 FUNDING STATL

/J K o r$AMOUNT COMMITTED 23,991 e

ACTUAL 31,680 10%

FLOOQ 19,193 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 Year 2021 2024 Page 14

DEPARTMENT OF WATER & POWER 2001 PALO VERDE UNIT 2 FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1)

(7 (3)

Authorized Funding Plan (4)

(5)

(6)

Funding Floor Curve C

nte erct IAmou (3) X (4)

(1) X (4)

(7)

(8)

(9)

Actual Funding Eund Est, Cost o Funded (7)/(8)

Month YFM End Est Cost Funded (2) X (3)

DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC r DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 3,055 4,104 5,237 6,449 6,931 8,397 9,699 12,044 13,700 15,492 17,428 19,343 21,580 23,991 26,124 28,900 31,888 35,102 37,991 41,677 45,636 49,887 53,760 58,619 63,830 68,617 74,561 80,928 87,746 93,103 101,831 106,923 112,269 117,882 123,776 129,965 15,542 25,418 26,689 28,023 26,658 27,991 29,390 33,456 35,129 36,885 38,730 40,298 42,313 44,429 46,650 48,982 51,432 54,003 56,703 59,538 62,515 65,641 68,923 72,369 75,988 79,787 83,777 87,965 92,364 96,982 101,831 106,923 112,269 117,882 123,776 129,965 20%lo 16%

20%/

23%

26%

30%

33%

36%

39o/.

42e/

45%

48%

51%

54%

56%

590/0 62%/

65%

670/

70e/.

73%

76%

78e/.

81%

84%

86%

89%/0 92M 95%

96%!.

100o%

100%/0 100%/

100%/

100"/.

80W/

8Wo 80/o 80/0 80%I 80W/.

80/

800/

800/.

80/

800/o 8Wo 81%

82M/e 83%

84%

85%/

86%

87%

88%/

890/%

90/

91%

92%/

93%

94%

950/0 96%

97r/

98e/

99O/.

1000/.

100%/9 16%

2,444 13%

3,283 16%/.

4,190 18%/

5,159 21%

5,545 24%

6,718 26%

7,759 29%/

9,635 31%

10,960 34%

12,393 36%

13,943 381/% 15,474 41%

17,264 430/0 19,193 45%/.

20,899 481/.

23,409 51%

26,148 540/%

29,135 56%

31,913 600/6 35,425 63%

39,247 66%

43,402 690/.

47,309 72/.

52,171 76%

57,447 786/6 62,442 82%6 68,596 86%

75,263 890/0 82,481 91%

88,448 96%1 97,758 97%

103,715 98%/6 110,023 99/.

116,703 1000/

123,776 1000/.

129,965 3,220 15,542 4,118 25,418 5,222 26,689 5,942 28,023 8,602 26,658 12,434 27,991 16,762 29,390 21,717 33,456 23,928 35,129 26,269 36,885 28,191 38,730 30,108 40,298 30,939 42,313 31,680 44,429 21%

16%

20%

21%

32%M 44%

57/

65%

68%

71%

73%

75%

73%

710/61 Page 15

DWP PALO VERDE UNIT 3 FUNDING PLAN 100%

I

[

FLOOFLOOR 18,AC8UAL]

60%

40%

2004 FUNDING STATUS

$AMOUNT PERCENT 2%COMMITTED 22,985 5 1%/

ACTUAL 31,734 70%

109 FLOOR2 18,388 41%

199.1

.1994

.1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Year Page 16

DEPARTMENT OF WATER & POWER 2001 PALO VERDE UNIT 3 FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1)

(2)

(3)

Audiorized Funding Plan Month Yin End Et C Fded (2) X (3)

(4)

(5)

(6)

Funding Floor Cuwre Crde m

(3) X (4)

(1) X (4)

(7)

(8)

(9)

Actual Funding EFnd Est CosI

% Funded t7/(8)

DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC DEC 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2,452 3,452 4,636 5,905 6,923 8,217 9,956 11,871 13,598 15,467 17,490 18,396 20,603 22,985 25,554 27,826 30,782 33,965 37,389 40,466 44,392 48,609 53,137 57,262 62,438 67,988 73,087 79,418 86,200 93,461 101,233 108,464 113,887 119,582 125,561 131,839 138,431 17,248 27,160 28,518 29,944 30,100 31,605 33,185 35,973 37,772 39,660 41,643 40,879 42,923 45,069 47,323 49,689 52,173 54,782 57,521 60,397 63,417 66,588 69,917 73,413 77,083 80,938 84,985 89,234 93,695 98,380 103,29 108,464 113,887 119,582 125,561 131,839 138,431 14%

13%

16%

20%

23%

26%

300/,

33%

36%

390/0 426/!

45%

48%

51%

54%

56%

590/a 62%

65%

670!.

70%

73%

76%

780/0 81%

84%

86%

890/s 92%!

95%

980/0 10/0 100%/0 10/0 100%/

100"/!

100°/

80/

80°/

80%/

80°/

80°/.

80W/.

80°/

80°/!

80/

80°/

80/

80°/

80%/.

80W/o 80/

81%

82°!

83%

84%

85%

86%

87%

88%

89°/

90%/0 91%

92°/!

93%

94%

95./!

96%

97%

980/.

990/,

100°/!

11%

1,962 100/!

2,762 13%

3,709 16%

4,724 18%/

5,538 21%

6,574 24%

7,964 26%

9,497 29'/!

10,878 31%

12,374 34%!

13,992 36%

14,716 38%!.

16,482 41%

18,388 43%!,

20,443 45%/,

22,261 47%

24,626 50%

27,511 53%

30,659 56%

33,587 59°!

37,289 62'!.

41,318 65%

45,698 68°/!

49,818 71%

54,945 75%!,

60,509 77!/

65,778 81%

72,270 85%

79,304 88°/!

86,919 92°/!

95,159 95%

103,041 96%

109,332 971/6 115,994 980!.

123,050 99!

130,520 100'!.

138,431 2540 3,438 4,542 5,356 8,181 12,332 16,843 21,831 23,832 26,233 28,421 29,941 30,701 31,734 17,248 27,160 28,518 29,944 30,100 31,605 33,185 35,973 37,772 39,660 41,643 40,879 42,923 45,069 15%

13%

16%!.

180!/

27/.

390/0 5t%

61%

63%

66%

68°/!

730/

72°!/

70%I Page 17

DWP PALO VERDE ALL UNITS FUNDING PLAN

.100%

9L0 X2004mmilTD FLOOR -*- A ra_

860%III I

70%

-. O-jK 60%

40%,

30%

$AMOUNT PERCENT 20%

COMMITTED 69,326 53%

ACTUAL 95,181 73%

10%

FLOOR 55,461 43%

0%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Year Page 18

DEPARTMENT OF WATER & POWER 2001 PALO VERDE ALL UNITS FUNDING STATUS TERMINATION COST FUNDING (In Thousand $)

(1)

(2)

(3)

Authorized Funding Plan Fund EstCost

% Funded (2) X (3)

(4)

(5)

(6)

Funding Floor Curve Ce t

S Amount (3) X (4)

(1) X (4)

(7)

(0 t

Actual Funding Fund Esr Cost

% Funded (7)/(8)

Month YAK DEC 1991 DEC 1992 DEC 1993 DEC 1994 DEC 1995 DEC 1996 DEC 1997 DEC 1998 DEC 1999 DEC 2000 DEC 2001 DEC 2002 DEC 2003 DEC 2004 DEC 2005 DEC 2006 DEC 2007 DEC 2008 DEC 2009 DEC 2010 DEC 2011 DEC 2012 DEC 2013 DEC 2014 DEC 2015 DEC 2016 DEC 2017 DEC 2018 DEC 2019 DEC 2020 DEC 2021 DEC 2022 DEC 2023 DEC 2024 DEC 2025 DEC 2026 DEC 2027 8,768 11,886 15,386 19,134 20,788 24,974 29,281 35,675 40,646 46,026 51,843 55,799 62,307 69,326 76,425 84,054 92,776 102,160 111,165 121,351 132,912 145,326 157,959 170,820 186,039 201,554 218,143 235,975 255,890 275,267 296,203 313,182 328,841 345,283 362,547 261,804 138,431 48,467 78,410 82,331 86,447 82,440 86,562 90,890 101,211 106,272 111,585 117,164 118,035 123,937 130,134 136,640 143,472 150,646 158,178 166,087 174,391 183,111 192,267 201,880 211,974 222,573 233,701 245,386 257,656 270,538 284,065 298,269 313,182 328,841 345,283 362,547 261,804 138,431 180/

15%

190/e 22%

25%

29'!.

32°/

35%

38%

41%

44%

47%

50%

53%

56%

590/0 62V/.

65%

67%

700/a 730/%

76%

78%!,

81%

84%

86%

890/.

92e 95%

99%/

10/0 100%/0 100%/

100%/

100°/

100%/

80/

80%/

800/.

80%/

oe/

80/

80%

820/9 80%

80%

810/,

85%

86%

87%

88%

89%

90%

91%

92%/.

93%

94%/s 95.,.

96%

97%/

980/.

99%/0 100'!.

100%/

1000/%

14%

7,014 12/%

9,509 15%

12,309 18%/

15,307 20%

16,631 23%

19,979 26%

23,425 28%

28,540 31%

32,517 33%

36,821 35%

41,474 38%

44,639 40'!

49,846 43%

55,461 45%

61,140 470 68,084 51%

76,076 54%

84,793 56%

93,379 59°/.

103,149 62/!

114,304 66%

126,433 690/.

139,004 72°/!

152,030 75%

167,435 78%

183,414 82%

200,692 85%

219,457 89%

240,537 92%/

261,504 95%

284,354 97/

303,787 98%

322,264 99%/.

341,830 100%/.

362,547 1000/.

261,804 100I*

138,431 9,186 11,862 15,126 17,504 25,844 37,694 50,533 65,398 71,236 78,596 84,627 89,971 92,401 95,181 48,467 78,410 82,331 86,447 82,440 86,562 90,890 101,211 106,272 111,585 117,164 118,035 123,937 130,134 190/,

15%

20%

31%

44%

56%

65%

67%

70e/.

72'!.

76%

75%

73%!.

Page 19

Palo Verde Nuclear Generating Station Appendix C, Tab I APS 2004 Annual Funding Status Report APS reports that its Master Trust Agreement was amended December 19, 2003.

A copy of the amendment is enclosed.

AMENDMENT NO. 4 Decommissioning Trust Agreement (PVNGS Unit 1)

This Amendment No. 4 dated as of Ih (jtgA, 2003, to the Decommissioning Trust Agreement (PVNGS Unit 1), dated as of July 1, 1991, as amended by Amendment No. 1 thereto dated as of December 1, 1994, Amendment No. 2 thereto dated as of December 16, 1996, and Amendment No. 3 thereto dated as of March 18, 2002 (the "Decommissioning Trust Agreement", terms used herein as therein defined), is entered into between Arizona Public Service Company

("APS")

and Mellon

Bank, N.A.,

as Decommissioning Trustee

("Decommissioning Trustee").

RECITALS:

WHEREAS, the parties hereto wish to amend the Decommissioning Trust Agreement.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment..

(a)

A new Section 29 will be added at the end of the Decommissioning Tnist Agreement and will read in full as follows:

Section 29.

Notice Regarding Disbursements or Payments.

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between the Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

The disbursement or payment from the Funds, if it is otherwise in compliance with the terms and conditions of this Agreement, may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Decommissioning Trustee or APS within the notice period.

The required notice may be made by the Decommissioning Trustee or on the Decommissioning Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii),

including withdrawals made during the operating life of Unit I to be used 00G95.217?4\\1k'Cgan1C\\PHX\\I 403632.2

for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8). This Section 29 is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, including but not limited to Section 10 hereof, and in the event of any conflict between any such provision and this Section 29, the provisions of this Section 29 shall control.

SECTION 2. Miscellaneous (a)

Full Force and Effect.

Except as expressly provided herein, the Decommissioning Trust Agreement shall remain unchanged and in full force and effect.

Each reference in the Decommissioning Trust Agreement and in any exhibit or schedule thereto to "this Agreement," "hereto," "hereof' and terms of similar import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

(b)

Counterparts/Representations.

The Amendment No. 4 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment No. 4 by signing any such counterpart. Each party represents and warrants to the other that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind that Party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to the Decommissioning Tr-st Agreement to be duly executed as of the day and year first above written.

ARIZONA PUBLIC SERVICE COMPANY

Title:

MELLON BANK, N.A. as Decommissioning Trustee By:_

Title:

UIC.T PWSIDNr 00095.2 i74\\Ike, aijc\\.PHX\\I403632.

2

STATE OF ARIZONA

)

) ss:

County of Maricopa

)

The foregoing instrument was acknowledged before me this I ZGoL day of 2003, by av'}if 13 'o,11'the Vro xr of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on beha said corporation.

Notary Public DE MARICpCUT My commission expires:

Mycom COMMONWEALTH OF PENNSYLVANIA

)

) ss:

County of Allegheny

)

The foregoing in ment was acknowledged b5ore me this day of 2003, by rb-i a )k~j d

Mellon Bank, N.A. a national banking association having trust powers, as Decommissioning Trustee, on behalf of said national banking association.

WPublic My commission expires:

COMMONWEALTH OF PENNSYLVANIA

_\\3.

COG ( 7 uie Notarial Seal c:)

C~~ityfPtsburgh, Allegheny County MY Expires Oct 13, 2007 Member Pennsylvania Assciafinn Of Notaries 00095j.21I74\\Ike vamckP FLX\\ 1403632.23 3

AMENDMENT NO. 7 Decommissioning Trust Agreement (PVNGS Unit 2)

This Amendment No. 7 dated as of Law"rl, 2003, to the Amended and Restated Decommissioning Trust Agreement (PVNGS Unit 2), dated as of January 31, 1992, as amended by Amendment No. I thereto dated as of November 1, 1992, Amendment No. 2 thereto dated as of November 1, 1994, Amendment No. 3 thereto dated as of June 20, 1996, Amendment No. 4 thereto dated as of December 16, 1996, Amendment No. 5 thereto dated as of June 30, 2000 and Amendment No. 6 thereto dated as of March 18, 2002 (the "Decommissioning Trust Agreement", terms used herein as therein defined), is entered into between Arizona Public Service Company ("APS"), U.S. Bank National Association, as successor-to State Street Bank and Trust Company, as successor to The First National Bank of Boston, as Owner Trustee and as Lessor, and Mellon Bank, N.A., as Decommissioning Trustee ("Decommissioning Trustee").

RECITALS:

WHEREAS, the parties hereto wish to amend the Decommissioning Trust Agreement.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment.

(a)

A new Section 34 will be added at the end of the Decommissioning Trust Agreement and will read in full as follows:

Section 34.

Notice Regarding Disbursements or Payments.

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between the Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear. Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

The disbursement or payment from the Funds, if it is otherwise in.

compliaiice with the terms and conditions of this Agreement, may be made.

following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Decommissioning Trustee or APS within the notice period.

The required notice may be made by the Decommissioning 00093. 2 74\\1 kegmanP HXBE 1 39909 5.3

Trustee or on the Decommissioning Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii),

including withdrawals made during the operating life of Unit 2 to be used for decommissioning planning. In addition, no Such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8). This Section 34 is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, including but not limited to Section 11 and Section 12 hereof, and in the event of any conflict between any such provision and this Section 34, the provisions of this Section 34 shall control.

(b)

Paragraph (1) of Exhibit B to the Decommissioning Trust Agreement is hereby deleted and is replaced in its entirety by the following:

(l)

(x) corporate equity securities, including, but not limited to, investment of units of common or collective trust funds investing in corporate equity securities; including, but not limited to, the Decommissioning Trustee's Nuclear Decommissioning Trust Equity Index Fund (the "NDT Equity Index Fund") and (y) obligations not included in clauses (a) through (k) issued or guaranteed by a person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, including Federal Intermediate Credit Bank, Banks for Cooperatives, Federal Land Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, provided, that no more than fifty percent (50%) of. the aggregate assets of the Funds may be invested in securities described in (x) and (y) of this subparagraph (I) during the period from June 27, 1996 through December 31, 2003, no more than forty percent. (40%) during the period from January 1, 2004 through December 31, 2006, and no more than twenty percent (20%) during the period from January 1, 2007 through January 31, 2010; and provided further that after January 31, 2010, no investmentsishall be made in such securities.

SECTION 2. Miscellaneous I

(a)

Full Force and Effect.

Except as expressly provided herein, the Decommissioning Trust Agreement shall remain unchanged and in full force and effect.

Each reference in the Decommissioning Trust Agreement and in any exhibit or schedule thereto to "this Agreement," "hereto," "hereof' and terms of similar import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

00D95.+/-2 ?4\\1ke-.mc\\PR-X\\1 3~999. 3

(b)

Counterparts/Representations.

The Amendment No. 7 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment No. 7 by signing any such counterpart.

Each party represents and warrants to the other that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind that Party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7 to the Decommissioning Trust Agreement to be duly executed as of the day and year first above written.

ARIZONA PUBLIC SERVICE COMPANY B y:

N

Title:

fieaula z-MELLON BANK, N.A. as Decommissioning Trustee

Title:

NJi ch (eSID 1e-1 U.S. BANK NATIONAL ASSOCIATION, as Owner Trustee under a Trust Agreement with Security Pacific Capital. Leasing Corporation and as Lessor under a Facility Lease with Arizona Public Service Company By:

Title:

-i-r.4-oA c4-00095

.74%1kevu:\\PHXI 39-')095.3 3

U.S. BANK NATIONAL ASSOCIATION, as Owner Trustee under a Trust Agreement with Emerson Finance LLC and as Lessor under a Facility Lease with Arizona Public Service Company By:

Title:

-nnu.&A-0-f-P'N 0009,.21 74\\Ike k

imcPHXNI 399093.3

4

STATE OF ARIZONA County of Maricopa

) ss:

The foregoing instrument was acknowledged before me this l With day of Jl~pg-ibpr

, 2003, by rarcj~(;)6T2X the Tr aWurer of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on behalf of said corporation.

.~ C$

6LX Notary Public My commission expires:

DEBRA L. BLONOIN NOTARY PU LIC.ArIzone MARICOPA COUNTY Lr my Exie une 7 2DOI COMMONWEALTH OF PENNSYLVANIA

) ss:

. County of Allegheny The foregoing instrument was acknowledged before me this

\\k'k day of 2003, by CHAOS c

OQL, a \\w'Xasicen of Mellon Bank, N.A. a national banking association having trust powers, as Decommissioning Trustee, on behalf of said national banking association.

otary Public*

k-Aj--Qo M-y comrnlission expires:

02-2crJ7b COMMONWEALTH OF PENNSYLVANIA Notaial Seal Jide An Mosco. Notzy Public City Of PftsbWuh, Alegheny CoQutY My Comnmssion Expires Od 13,2007 Memnber, Pennsylvania Assoclation Of Notaries 9

00091i2 174kej~amcPHX% I 5909.

5

[COMMONWEALTH OF MASSACHUSETTS] )

) ss:

County of S ag4 l0t

)

The foregoing instrument was acknowledged before me this f'149 day of Pecebe-

, 2003, by ?ek -_.Wi VA.

y

, a Sir;< °'Caf of U.S. Bank National Association, in its capacity as Owner Trustee under a Trust Agreement with Security Pacific Capital Leasing Corporation and as Lessor under a Facility Lease with Arizona Public Service Company, on behalf of said association in such capacities.

Notary Public My commission expires:

t MARIA I. ARGUELLO NOTARY PUBLIC MY COMMISSION EXPIRES

&r-e SEPTEMBER 9, 2005

[COMMONWEALTH OF MASSACHUSETTS] )

) ss:

County of StATg-if

)

The foregoing instrument was acknowledged before me this I1'y day of

_____,_b__

2003, by lesf b

rAay a

OWc,a of U.S. Bank National Association, in its capacity as Owner Trustee under a Trust Agreement with Emerson Finance LLC and as Lessor under a Facility Lease with Arizona Public Service Company, on behalf of said association in such capacities.

Notary Public

My commission expires:

e MARIA I. ARGUELLO NOTARY PUBLIC MY COMMISSION EXPIRES SEPTEMBER 9, 2005 00095.21 7411Ler'a4%1CkPWV'1 1131"109 S. 3 6

AMENDMENT NO. 4 Decommissioning Trust Agreement (PVNGS Unit 3)

This Amendment No. 4 dated as of _________

2003, to the Decommissioning Trust Agreement (PVNGS Unit 3), dated as of July 1, 1991, as amended by Amendment No. I thereto dated as of December 1, 1994, Amendment No. 2 thereto dated as of December 16, 1996, and Amendment No. 3 thereto dated as of March 18, 2002 (the "Decommissioning Trust Agreement", terms used herein as therein defined), is entered into between Arizona Public Service Company ("APS")

and Mellon

Bank, N.A.,

as Decommissioning Trustee

("Decommissioning Trustee").

REC I TA LS:

WHEREAS, the parties hereto wish to amend the DecommissioningTrust Agreement.

NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. Amendment.

(a)

A new Section 29 will be added at the end of the Decommissioning Trust Agreement and will read in full as follows:

Section 29.

Notice Regarding Disbursements or Payments.

Notwithstanding anything to the contrary in this Agreement, except for (i) payments of ordinary administrative costs - (including taxes) and other incidental expenses of the Funds (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Funds, (ii) withdrawals being made under 10 CFR 50.82(a)(8), and (iii) transfers between the Funds in accordance with the provisions of this Agreement, no disbursement or payment may be made from the Funds until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment.

The disbursement or payment from the Funds, if it is otherwise in compliance with the terms and conditions of this Agreement, may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Decommissioning Trustee or APS within the notice period.

The required notice may be made by the Decommissioning Trustee or on the Decommissioning Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii),

including withdrawals made during the operating life of Unit 3 to be used 00095.? 174\\1kegamc\\PHX\\140364 1.2

for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8). This Section 29 is intended to qualify each and every provision of this Agreement allowing distributions from the Funds, including but not limited to Section 10 hereof, and in the event of any conflict between any such provision and this Section 29, the provisions of this Section 29 shall control.

SECTION 2. Miscellaneous (a)

Full Force and Effect.

Except as expressly provided herein, the Decommissioning Trust Agreement shall remain unchanged and in full force and effect.

Each reference in the Decommissioning Trust Agreement and in any exhibit or schedule thereto to "this Agreement," "hereto," "hereof' and terms of similar import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

(b)

Counterparts/Representations.

- The Amendment No. 4 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment No. 4 by signing any such counterpart.

Each party represents and warrants to the other that it has full authority to enter into this Amendment upon the terms and conditions hereof and that the individual executing this Amendment on its behalf has the requisite authority to bind that Party.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to the Decommissioning Trust Agreement to be duly executed as of the day and year first above written.

ARIZONA PUBLIC SERVICE COMPANY By_______

Title:

res ae MELLON BANK, N.A. as Decommissioning Trustee By:_____________

Title:

'Jic~s fE e -s uo r 00095.2174%1kesanic\\PWX I 403641.2 2

STATE OF ARIZONA County of Maricopa

) ss:

The foregoing instrument was acknowledged before me this l

day of pCQiYl be,

, 2003, by ray-16M2 the Ie, rof ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on beha f said corporation.

P ) " A i)n L My commission expires:

COMMONWEALTH OF PENNSYLVANIA

) ss:

County of Allegheny The foregoing inru ment was acknowledged before me this I9 day of A,

2003, by j

a 0%

qVq Tof Mellon Bank, N.A. a ational bankcing association having trust powers, as Decommissioning Trustee, on behalf of said national banking association.

-V'- 4w(o Public My commission expires:

' C-)

ic

\\-.

70ce)

COMMONWEALTH OF PENNSYLVANIA Nodaril Sea Julie Ann Mosco. Notary Public City Of Pittsburgh, Alegheny County t 4v (w tnlIor Fypires Oct. 13.2007 A '

mturies D009i.21 74\\1kegantIc\\PHX\\4O364l.2 3

Palo Verde Nuclear Generating Station Appendix C, Tab 2 SRP 2004 Annual Funding Status Report SRP reports that its Master Trust Agreement was amended November 19, 2003.

A copy of the amendment is enclosed.

AMENDMENT NO. 1 TO THE SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT DECOMMISSIONING TRUST FUND AGREEMENT This Amendment is effective as of this K day of Ikt)?;4lw 2003 by and between SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district organized under the laws of the State of Arizona ("Grantor"), and MARSHALL & ILSLEY TRUST COMPANY N.A., a national association having trust powers, as successor in interest to M & I MARSHALL & ILSLEY TRUST COMPANY OF ARIZONA, a banking corporation having trust powers and organized under the laws of the State of Arizona ("Trustee").

RECITALS This Amendment Number 1 to the Salt River Project Agricultural Improvement and Power District Decommissioning Trust Fund Agreement is made with reference to the following fact among others:

To meet new requirements established by the Nuclear Regulatory Commission under 10 CFR § 50.75, the Grantor and Trustee have reached an understanding resulting in the following modification and addition to the Salt River Project Agricultural Improvement and Power District Decommissioning Trust Fund Agreement dated July 6, 1990 (the "Agreement').

NOW, THEREFORE, in consideration of the mutual covenants, terms, and conditions set forth herein, the Grantor and Trustee agree that the Agreement be and is hereby amended as follows:

1.

NEW SECTION 2.03 Section 2.03 is deleted in its entirety and a new section 2.03 is hereby substituted therefore; new Section 2.03 reads as follows:

2.03 Adiustments for Excess Contributions.

The Trustee and the Grantor understand and agree that the value of the assets in the Trust Fund, including earnings thereon, from time to time may exceed the greater of the minimum amount than required to be maintained under the Regulations or under the ANPPPA (such excess is hereinafter referred to as for the purposes of this Agreement as the "Excess Contribution"). Subject to the provisions of Section 2.08 below, upon Certification of the amount of any Excess Contribution, the Trustee shall pay the amount requested in the Certificate to the person or persons specified (which may be the Grantor). In no event shall the amount so paid exceed the amount of the Excess Contribution specified by the Certificate.

2.

NEW SECTION 2.08

A new Section 2.08 is hereby added, which Section reads as follows:

2.08 Notice Regarding Disbursements or Payments.

Except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the fund, and (ii) withdrawals being made under 10 CFR § 50.82(a)(8), no disbursement or payment may be made from the trust until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment. The disbursement or payment from the trust may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Trustee or the Company within the notice period. The required notice may be made by the Trustee or on the Trustee's behalf. No such notice is required for withdrawals being made pursuant to 10 CFR § 50.82(a)(8)(ii), including withdrawals made during the operating life of the plant to be used for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR § 50.82(a)(8).

3.

NO OTHER MODIFICATION:

A)

Except as specifically set forth otherwise in this Amendment, the terms and conditions of the Agreement shall apply to this Amendment. In case of a conflict in the provisions, the terms of this Amendment shall control.

B)

In all other respects the Agreement shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the Grantor and Trustee have executed this Amendment as of the dates set forth below, with the understanding that the Amendment is effective as of the day and year first written above.

GRANTOR:

TRUSTEE:

SALT RIVER PROJECT AGRICULTURAL MARSHALL & ILSLEY IMPROVEMENT AND POWER DISTRICT TRUST COMPANY N.A.

By:_

By 4m /6Ž~*i William P. Schrader Its: President Its:_

_P_

Date:__

Date: _____3__31 I__

_3_

APPROVED AS TO FORM Saltes Department:

By:

.2

Palo Verde Nuclear Generating Station Appendix C, Tab 3 EPE 2004 Annual Funding Status Report EPE reports that its Master Trust Agreement was amended December 18, 2003.

A copy of the amendment is enclosed.

DECOMMISSIONING TRUST AGREEMENT Dated as of December 18, 2003 between EL PASO ELECTRIC COMPANY and BANK OF AMERICA, N.A.

As Decommissioning Trustee for Palo Verde Unit 1

DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION UNIT I This Decommissioning Trust Agreement (the "Agreement"), to be effective as of December 24, 2003 (the "Effective Date"), between Bank of America, N.A., a national banking associatkio ('CDecommissioin-ing Trustee") and El Paso Electric Company, a Texas corporation

("El Paso").

The Nuclear Regulatory Commission ("NRC"), an agency of the United States of America, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations codified in Title 10, Chapter 1 of the Code of Federal Regulations, Part 50, as amended. These regulations, applicable to El Paso, require that each holder of a license issued pursuant thereto must provide assurance that funds will be available for Decommissioning.

El Paso and others entered into the Arizona Nuclear Power Project Participation Agreement executed as of August 23, 1973 (the "ANPP Participation Agreement").

Amendment 13 to the ANPP Participation Agreement, effective June 15, 1991, requires El Paso to establish and maintain funds for the accumulation, over a period not in excess of the remaining term of the operating license for Unit 1 and the period thereafter until completion of Decommissioning, of funds sufficient to pay Decommissioning Cost.

In addition, El Paso is required by the Public Utility Commission of Texas ("PUCT"),

the New Mexico Public Regulation Commission ("NMPRC"), the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission to establish a source of funds to pay for Decommissioning.

Under Applicable Tax Law, certain federal income tax benefits are available to El Paso from establishing and making contributions to a "Nuclear Decommissioning Reserve Fund" for Unit 1. In order to satisfy its obligations under the ANPP Participation Agreement, to comply with the requirements of the governmental authorities referred to above, and to obtain such federal income tax benefits, on April 1, 1986, El Paso entered into a Decommissioning Trust Agreement, which was amended by Amendment No. I dated September 1, 1991 (the "Original Agreement"), creating two decommissioning trust funds to provide external funds for Decommissioning, for purposes of this Agreement designated as the Decommissioning Trust Fund and the Second Fund. The Decommissioning Trust Fund is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

On January 9, 1996, in Cause No. 92-10148-FM, styled In re: El Paso Electric Company, the United States Bankruptcy Court for the Western District of Texas (Austin Division) entered an order confirming the Fourth Amended Plan of Reorganization of El Paso (the "Plan"). In accordance with the Plan, which became effective on February 12, 1996, El Paso and Decommissioning Trustee restated and amended the Original Agreement to ensure that the Decommissioning Trust Fund and the Second Fund would continue to be held, managed and distributed, without interruption, in accordance with the terms of the Original Agreement, Applicable Law, and Applicable Tax Law.

2

This Agreement, in turn, amends and restates the Original Agreement, as restated and amended effective February 12, 1996, to read in its entirety as follows and continues the Decommissioning Trust Fund and the Second Fund.

Therefore, in consideration of the foregoing premises, the acceptance by Decommissioning Trustee of the trusts created, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto restate and amend the Original Agreement, as restated and amended effective February 12, 1996, as follows:

SECTION 1. Definitions; References to Sections. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Appendix A hereto. Unless otherwise stated, references to a "Section" are to a section of this Agreement.

SECTION 2.

Creation of Trust Funds. El Paso has established and hereby confirms the establishment with Decommissioning Trustee of the Decommissioning Trust Fund and the Second Fund (each a "Fund" and together the "Funds"). Each Fund shall include: (A) all cash and investments thereof, as more specifically described in Section 7; (B) all dividends, interest, cash, instruments, and other property from time to time received, receivable, or otherwise distributed or distributable in respect of or in exchange for any or all such investments; (C) all rights and privileges with respect to such investments; and (D) all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted.

SECTION 3.

Purpose of Trust Funds; Tax Qualification. The Funds are for the accumulation and funding of amounts to pay costs, liabilities, and expenses of Decommissioning, including the accumulation, over a period not in excess of the remaining term of the operating license for Unit 1 and the period thereafter until completion of Decommissioning, of amounts which are sufficient to pay Decommissioning Cost.

The Decommissioning Trust Fund, but not the Second Fund, is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law. El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall seek to obtain the best possible tax treatment of amounts collected for nuclear plant decommissioning; and in this regard, El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall take maximum advantage of tax deductions and..- ed-4s whe-. 4 is consistent with sound busii tss piactices to do so. The assets of the Decommissioning Trust Fund must bc used as authorized by section 468A of the Code and shall be used exclusively:

I (A) subject to the limitations and conditions of Section 9, to satisfy, in whole or in part, El Paso's obligation to pay for Decommissioning; (B) subject to the limitations and conditions of Section 8, to pay Expenses; and (C) to the extent not currently required for the uses described in (A) and (B) above, and subject to the limitations and conditions of Section 7, for investment in Qualified Investments.

3

The Funds shall be used exclusively for Decommissioning of Unit 1. This Agreement may not be amended so as to violate section 468A of the Code or the regulations there under.

SECTION 4.

Declaration and Acceptance of Trust.

Decommissioning Trustee accepts the trusts created hereby and declares that it will hold and administer all estate, right, title, and interest in and to each Fund upon the trusts set forth herein, but only on the terms of this Agreement, and agrees to receive and disburse all moneys and investments constituting any part of each Fund in accordance with this Agreement. No implied duties or obligations shall be read into this Agreement against Decommissioning Trustee. Decommissioning Trustee shall not commit any act, enter into any transaction, or permit any act or transaction to occur that is an "act of self dealing" between the Decommissioning Trust Fund and "a disqualified person" as those terms are defined by Applicable Tax Law, and, if such an act occurs, Decommissioning Trustee shall promptly take all necessary steps to correct it as soon as it has knowledge of the occurrence.

SECTION 5. Ownership of Funds. Not in limitation of its fiduciary duty hereunder, title to any and all property held in each Fund shall be held by Decommissioning Trustee in its name as trustee as owner of record. At all times, Decommissioning Trustee shall follow the directives of (A) the applicable Fiduciary Investment Manager, if any, with respect to exercising any and all corresponding voting, consensual, and other rights accruing to the owner of such property in connection with such property, and, except as provided in this subsection 5.(A), (B)

El Paso with respect to exercising any and all such voting, consensual, and other rights.

Decommissioning Trustee shall have the right, in its name, as trustee upon prior written notice to El Paso, to settle, compromise, prosecute, or defend any action, claim, or proceeding with respect to any and all property held in each Fund.

Subject to the provisions of this Agreement, Decommissioning Trustee may sell, assign, endorse, pledge, transfer, and make any agreement respecting, or otherwise deal with, any and all property held in each Fund; provided, however, that except as required by Section 7, nothing herein contained shall be construed as requiring or obligating Decommissioning Trustee to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to any of the property held in each Fund. It is not the duty of Decommissioning Trustee or a Fiduciary Investment Manager to ensure that the Funds are adequate to pay for Decommissioning.

SECTION 6. Payments into the Funds. From time to time, but not less than yearly, El Paso shall pay amounts into one or both of the Funds. El Paso may deposit all or any part of any payment entirely into the Decommissioning Trust Fund, entirely into the Second Fund, or partly into each in whatever proportion El Paso shall determine in its discretion; except thlif 'a deduction is allowed under Applicable Tax Law for payments into the Decommissioning Trust Fund, El Paso shall not make, and Decommissioning Trustee shall not accept, any payment into such Fund unless such payment (a) is in cash, to the extent Applicable Tax Law requires the payment to be in cash, and (b) complies with the amount limitation imposed by Applicable Tax Law and a deduction pursuant to Applicable Tax Law is allowed for the entire payment.

Decommissioning Trustee may accept from El Paso, as proof that these conditions are satisfied, a certificate executed by El Paso as to compliance with the amount limitation and deductibility of such payment, and, unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee may rely on such certificate without further inquiry or verification.

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SECTION 7.

Investment of Funds.

(A)

Decommissioning Trustee. Any amounts held by Decommissioning Trustee in each Fund shall be invested and reinvested by it from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to Decommissioning Trustee a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of either Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as Decommissioning Trustee hereunder, and in performing any investment management functions hereunder, Decommissioning Trustee shall comply with the following:

(i) it shall add all income, including interest, earned on the corpus of each Fund to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have the continuing duty to review the assets of each Fund to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered and certified to Decommissioning Trustee as provided above, and any other applicable governing regulations; (iii) it shall not lend all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, El Paso, its subsidiaries or affiliates or their successors or assigns, except that, if El Paso approves in writing, it may invest or reinvest amounts in the Funds in mutual funds that contain securities issued by El Paso provided such 5

securities constitute no more than five percent (5%/o) of the fair market value of the assets of such mutual funds at the time of the investment; and (vi)

Notwithstanding anything to the contrary in this Agreement, if directed by El Paso, Decommissioning Trustee shall hold and maintain one or both of the Funds in a segregated account and invest and administer such Fund(s) separately from the assets of Decommissioning Trustee or other trusts.

(B)

Fiduciary Investment Manager.

Any amount of each Fund directed to be invested by a Fiduciary Investment Manager shall be invested and reinvested by Decommissioning Trustee as directed by such Fiduciary Investment Manager from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to a Fiduciary Investment Manager a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of a Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommnissioning Trustee may rely upon such written direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as a Fiduciary Investment Manager hereunder, a Fiduciary Investment Manager shall comply with the following:

(i) it shall direct the addition of all income, including interest, earned on the corpus of each Fund subject to its direction to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have a continuing duty to review the assets of each Fund subject to its direction to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered to such Fiduciary Investment Manager as hereinabove provided and any other applicable governing regulations; (iii) it shall not direct the lending of all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, Decommissioning Trustee or any of Decommissioning Trustee's officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do 6

so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (vi) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by El Paso, its subsidiaries or affiliates or associates or their successors or assigns of El Paso, except that, if El Paso approves in writing, it may direct the investment or reinvestment of amounts in the Funds in mutual funds that contain securities issued by El Paso provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vii) it shall provide Decommissioning Trustee directives concerning voting, consensual, and other rights and powers accruing in connection with assets of the Funds subject to such Fiduciary Investment Manager's direction.

(C)

General. It is the intent of El Paso that neither Decommissioning Trustee nor a Fiduciary Investment Manager shall have any powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations that are set out in this Section 7.

(D)

Investments Standards. To the extent not inconsistent with the other provisions of this Section 7 and to the extent that Decommissioning Trustee does not currently require the assets of the Funds for the purpose of satisfying the liability of El Paso for Decommissioning and to pay Expenses:

(i)

Decommissioning Trustee shall, in connection with investing and reinvesting assets of the Funds, exercise the same standard of care that a reasonable person would exercise in the same circumstances; provided, however, that this subsection 7.(D)(i) shall apply only as to those assets of the Funds that are not subject to the direction of a Fiduciary Investment Manager; and (ii) a Fiduciary Investment Manager appointed to direct the investment and reinvestment of all or any portion of the assets of the Funds shall, with respect to such assets subject to its direction, exercise the same degree of care that a reasonable person would exercise in the same circumstances.

For purposes of this subsection entitled "Investment Standards", a "reasonable person" means a prudent investor as described in Chapter 117, Uniform Prudent Investor Act, of the Texas Property Code.

(E)

Qualified Investments. Qualified Investments include those investments meeting the investment standards, limitations, conditions, and requirements prescribed in the foregoing subsections of this Section 7 and the following criteria which may be amended by El Paso upon written notice to Decommissioning Trustee and each Fiduciary Investment Manager.

(i)

Investment Portfolio Goals. The Funds shall be invested consistent with the goals set forth in this subsection 7.(E)(i).

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(a)

Assets of the Decommissioning Trust Fund shall be invested only as permitted for a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

(b)

Assets of the Funds shall be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the Funds.

(c)

In keeping with prudent investment practices, the portfolio of securities held in the Funds shall be diversified to the extent reasonably feasible given the size of the Funds.

(d)

Asset allocation and the acceptable risk level of the assets of the Funds should take into account market conditions, the time horizon remaining before the commencement and completion of Decommissioning, and the funding status of the Funds.

While maintaining an acceptable risk level consistent with the goal referenced in subsection 7.(E)(i)(b) of this Section 7, the investment emphasis when the remaining life of the liability, as defined in subsection 7.(E)(ii)(d)(4) of this subsection, exceeds five years should be to maximize net long-term earnings.

The investment emphasis in the remaining investment period of the Funds should be on current income and the preservation of each Fund's assets.

(e)

In selecting investments, the impact of the investment on the volatility and expected return of the assets of the Funds, net of fees, commissions, expenses, and taxes should be considered.

(ii)

General Requirements.

The restrictions contained in this subsection 7.(E)(ii)apply to the Decommissioning Trust Fund and Second Fund in the aggregate.

For purposes of this subsection 7.(E)(ii), a commingled funds is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.

(a)

Diversification. For the purpose of this subsection 7.(E)(ii)(a), a commingled or mutual fund is not considered a security, rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including those held in commingled or mutual funds) held in the Funds contains securities with an aggregate value in excess of $20 million, it shall be diversified such that:

(1) no more than five percent (5%) of the securities held may be issued by one entity, with the exception of the federal government, its agencies and instrumentalities; and 8

(2) the portfolio shall contain at least 20 different issues of securities, and municipal securities and real estate investments shall be diversified as to geographic region.

(b)

Derivatives.

The use of derivative securities in the Funds is limited to those whose purpose is to enhance returns of the Funds without a corresponding increase in risk or to reduce risk of the assets of the Funds. Derivatives may not be used to increase the value of the assets of the Funds by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of collateralized mortgage obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics.

(c)

Leverage. The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for a Fund is prohibited.

(d)

Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value:

(1) except as noted in subsection 7.(E)(2)(b), when the weighted average remaining life of the liability exceeds 5 years, the equity cap shall be sixty percent (60%);

(2) when the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be thirty percent (30%). Additionally, during all years in which expenditures for Decommissioning occur, the equity cap shall also be thirty percent (30%);

(3) when the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be zero percent (0%);

(4) for purposes of this subsection 7.(E)(ii)(4), the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each Decommissioning outlay, where the weights are based on each year's expected Decommissioning expenditures divided by the amount of the remaining liability in that year; and 9

(5) should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the market value of the non-fixed income investments shall be reduced below the cap as soon as practicable.

Such reductions may be accomplished by investing all future contributions to a Fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities.

(iii)

Specific Investment Restrictions.

The restrictions contained in this subsection 7.(E)(iii). apply to the Decommissioning Trust Fund and the Second Fund in the aggregate.

(a)

Fixed-income investments.

Assets of the Funds shall not be invested in corporate or municipal debt securities that have a bond rating below investment grade "BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased. If the debt rating of a company or municipality issuing the particular debt security falls below investment grade at some time after the security was purchased, the appropriateness of continuing to hold such security shall be reexamined. The overall portfolio of debt instruments shall have a quality level, measured quarterly not below an "AA" grade by Standard & Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating.

(b)

Equity Investments.

(1)

At least seventy percent (70%) of the aggregate market value of the equity assets of the Funds, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 Index assuming equal weighting of each ranked security in the Index. If the quality rating, measured quarterly, falls below the minimum quality standard, the quality level of the equity assets of the Funds shall be increased to the required level as soon as is practicable and prudent: and (2) assets of the Funds shall not be invested in equity securities if the issuer has a capitalization of less than $100 million.

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(c)

Commingled funds. The following guidelines shall apply to the investments made through commingled funds.

Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds.

(1)

The commingled funds should be selected consistent with the investment goals specified in subsection 7.(E)(i) and the general requirements in subsection 7.(E)(ii);

(2) in evaluating the appropriateness of a particular commingled fund, the following duties shall be of a continuing nature:

(I) a duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) a duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) a duty to investigate the reasonableness of the net after-tax return and risk of the commingled fund relative to similar funds, and the appropriateness of the commingled fund within all of the assets of the Funds; (3) the payment of load fees shall be avoided; and (4) commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the Funds' overall investment portfolio mix.

Notwithstanding any other provision of this Section 7, nothing in this Section 7 shall be construed to permit any investment otherwise prohibited by any other provision of this Agreement, Applicable Law, or Applicable Tax Law. This Agreement and the investments of the Funds shall be interpreted and construed in a manner consistent with the parties' intention that this Agreement and the Funds at all times comply with all requirements of the Nuclear Regulatory Commission and other applicable governmental regulations and rules, including without limitation the rules of the PUCT, the NMPRC, and the Federal Energy Regulatory Commission, including but not limited to the "Final Rule" regarding the formation, organization and purposes of nuclear plant decommissioning trust funds and for fund investments issued June 16, 1995, as may be amended from time to time.

11

SECTION 8. Expenses; Indemnification. El Paso shall pay all Expenses and, subject to Section 9.(D), may direct Decommissioning Trustee, in writing, to pay specified Expenses of a Fund from such Fund. El Paso shall certify in writing to Decommissioning Trustee whether and the extent to which an item is an Expense of a specified Fund and whether Applicable Tax Law permits its payment out of the assets of the Fund; and Decommissioning Trustee may, unless it has actual knowledge to the contrary, rely upon such certification without further inquiry or verification.

Except to the extent Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon the existence of any fact or state of facts represented to it in writing by El Paso or a duly appointed Fiduciary Investment Manager.

Except with respect to liability or fiduciary responsibility for any error or loss that may result by reason of the exercise or non-exercise of the duties, obligations, and/or fiduciary responsibility which are allocated to Decommissioning Trustee herein which is determined to be the result of Decommissioning Trustee's own negligence or willful misconduct, El Paso shall indemnify Decommissioning Trustee, directly from El Paso's own assets (including the proceeds of any insurance policy the premiums of which are paid from El Paso's own assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration or investment of the Funds. Decommissioning Trustee shall not be liable for any action taken by Decommissioning Trustee or any failure to act by Decommissioning Trustee if the action taken or the failure to act was directed by El Paso or a Fiduciary Investment Manager, if Decommissioning Trustee reasonably relied on such direction.

This Section 8 shall survive the termination of this Agreement.

SECTION 9. Payments and Distributions from the Funds.

(A)

Subject to the other provisions of this Section 9, Decommissioning Trustee shall make payments out of the Funds upon presentation by El Paso of (A) a certificate signed by El Paso (i) instructing Decommissioning Trustee to disburse amounts in the Funds in a manner designated in such certificate for purposes of paying for Decommissioning and (ii) certifying that disbursements, if any, directed to be made from assets of the Decommissioning Trust Fund are for payment of only those costs, liabilities, and expenses of Decommissioning that qualify as "nuclear decommissioning costs" under Applicable Tax law, and (B) documentation reasonably acceptable to Decommissioning Trustee that such payment for Decommissioning is due and payable.

(B)

Upon termination of the Decommissioning Trust Fund under Applicable Tax Law, El Paso may direct Decommissioning Trustee to transfer all property remaining in the Decommissioning Trust Fund to El Paso for disbursement or distribution as may then be provided by law. In addition, upon its receipt of a certificate signed by El Paso certifying that Decommissioning has been completed under Applicable Law and all costs of Decommissioning have been paid in full, all property then held in both Funds shall be paid by Decommissioning Trustee to El Paso for disbursement or distribution as may then be provided by law and the Funds shall terminate.

12

(C)

At any time and from time to time El Paso may direct Decommissioning Trustee in writing to, and upon receipt of such direction Decommissioning Trustee shall, subject to the applicable provisions of Section 9.(D), distribute to El Paso for disbursement or distribution as then may be provided or permitted by law or transfer from the Decommissioning Trust Fund to the Second Fund any:

(i)

Deemed Distribution Amount that El Paso certifies in writing is deemed distributed under Applicable Tax Law; (ii)

Excess Contribution that El Paso certifies in writing (a) has occurred under Applicable Tax Law, and (b) is being transferred within the time permitted for withdrawal or transfer of such Excess Contribution by Applicable Tax Law; and (iii) amount that El Paso certifies in writing may be transferred to the Second Fund in accordance with Applicable Law and Applicable Tax Law by reason of the disposition of all or a part of El Paso's interest in or license to possess Unit 1.

(D)

Notwithstanding any other provision in this Agreement, except for (i) payments made under Section 8 for Expenses, (ii) to the extent allowed by Applicable Law, Deemed Distribution Amounts and Excess Contributions transferred to the Second Fund or distributed to El Paso under Section 9.(C), and (iii) withdrawals made pursuant to 10 C.F.R. 50.82(a)(8) no disbursement or payment from the Funds shall be made unless (a) thirty (30) business days prior written notice of the intention to make such disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, and the Director, Office of Nuclear Material Safety and Safeguards, and (b) Decommissioning Trustee has not received written notice of an objection during such thirty (30) day period from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards,. The notices required by this Section 9.(D) may be made by or on behalf of Decommissioning Trustee.

(E)

Unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon any certificate described in Section 9 without further inquiry or verification.

SECTION 10. Further Assurances. El Paso agrees that it will, at its sole expense, do all such further acts and things and execute and deliver all such additional conveyances, assignments, agreements, and instruments, as may be necessary or desirable or as Decommissioning Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement, or relative to the Funds or any part thereof, or in order to assure and confirm unto Decommissioning Trustee its rights, powers, and remedies hereunder.

El Paso may provide general investment policies in writing to Decommissioning Trustee or a Fiduciary Investment Manager, but may not engage in the day-to-day management of the Funds or mandate, or itself make, individual investment decisions except to the extent that El Paso retains the right under this Agreement to approve investments in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, in mutual funds that contain securities issued by Decommissioning Trustee (subject to the limitations elsewhere herein set forth), or in mutual funds that contain securities issued by El Paso, its subsidiaries or affiliates or their successors or assigns (subject to the limitations elsewhere herein set forth).

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El Paso will regularly supply to Decommissioning Trustee and to each Fiduciary Investment Manager, and regularly update, essential information about Unit 1, including its description, useful life, the Decommissioning plan that El Paso intends to follow, El Paso's anticipated liquidity needs once Decommissioning begins, and any other information that Decommissioning Trustee and a Fiduciary Investment Manager need to construct and maintain, over time, a sound investment plan for the Funds.

SECTION 11. Irrevocability and Modification. This Agreement is irrevocable and may not be amended or modified except by a writing signed by the parties hereto and approved, to the extent required by Applicable Law, by applicable regulatory authority(s). The parties agree that they will execute any amendments requested by El Paso that are necessary to secure and maintain the qualification of the Decommissioning Trust Fund as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law and the deduction of contributions to such Fund as provided by such law, or to comply with Applicable Law.

Not in limitation of the foregoing, if and to the extent that, now or in the future, federal tax law may extend certain tax benefits to a trust fund or funds that are created and maintained by El Paso for creation of a reserve or funds for costs associated with Decommissioning (hereinafter in this Section 11 referred to as such "other trusts") which such other trusts would qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law, including without limitation, Internal Revenue Code section 468A, only if established and maintained pursuant to a single trust agreement for a particular nuclear power plant, the parties hereto, upon the creation of such other trusts may amend this Agreement by attaching hereto as an allonge the governing instruments by which such other trusts may be created. In such event, such other trusts shall be administered under the terms of this Agreement to the extent not inconsistent with the governing instruments by which such other trusts may be created and such other trusts shall thereafter be administered as separate funds under the terms of this Agreement.

SECTION 12. Obligation for Decommissioning. Nothing in this Agreement and no act or omission relating to the Funds shall be read, construed, understood, or interpreted to place any obligation whatsoever on Decommnissioning Trustee or a Fiduciary Investment Manager relating to Decommissioning or any Decommissioning Cost, all of which shall at all times remain the sole obligation of El Paso.

SECTION 13. Governing Law. This Agreement shall be deemed to be a contract made in Texas for all purposes and shall be construed in accordance with and governed by the laws of such State, including the provisions of the Texas Trust Code, with respect to all matters of construction, validity, and performance.

SECTION 14. Resignation and Replacement of Decommissioning Trustee or Fiduciary Investment Manager.

(A)

Decommissioning Trustee may resign at any time without cause by giving at least 30 days prior written notice to El Paso, and El Paso may remove Decommissioning Trustee at any time with or without cause by giving written notice to Decommissioning Trustee, such resignation or removal to be effective on the acceptance of appointment by a successor Decommissioning Trustee under this Section 14. In case of the resignation or removal of Decommissioning Trustee, El Paso may appoint a successor Decommissioning Trustee by an 14

instrument signed by El Paso. If a successor Decommissioning Trustee shall not have been appointed by El Paso within 30 days after the giving of such written notice of resignation or removal, Decommissioning Trustee or El Paso may apply to any court of competent jurisdiction to appoint a successor Decommissioning Trustee to act until such time, if any, as a successor Decommissioning Trustee shall have been appointed by El Paso and shall have accepted its appointment under this Section 14. Any successor Decommissioning Trustee so appointed by such court shall immediately and without further act be superseded by any successor Decommissioning Trustee appointed by El Paso as provided above.

(i)

In appointing a Decommissioning Trustee, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether Decommissioning Trustee's fee schedule for administering the trust is reasonable when compared to other institutional trustees rendering similar services; (b) a duty to investigate and determine whether the past administration of trusts by Decommissioning Trustee has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of Decommissioning Trustee is adequate; (d) a duty to investigate and determine whether Decommissioning Trustee is in compliance with the requirements of this Agreement; and (e) a duty to investigate any other factors which may bear on whether Decommissioning Trustee is suitable.

(ii)

Any successor Decommissioning Trustee, however appointed, shall execute and deliver to the predecessor Decommissioning Trustee an instrument accepting such appointment, and thereupon such successor Decommissioning Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties, and trusts of the predecessor Decommissioning Trustee with like effect as if originally named as Decommissioning Trustee herein; and such predecessor Decommissioning Trustee shall duly assign, transfer, deliver, and pay over to such successor Decommissioning Trustee all moneys or other property then held by such predecessor Decommissioning Trustee upon the trusts expressed in this Agreement, shall do all acts necessary to vest title of record in such successor Decommissioning Trustee, and shall transfer and deliver to such successor Decommissioning Trustee copies of all records pertaining to the Funds and this Agreement.

In addition, upon the written request of such successor Decommissioning Trustee, such predecessor Decommissioning Trustee shall execute and deliver to such successor Decommissioning Trustee an instrument transferring to such successor Decommissioning Trustee, upon the trusts expressed in this Agreement, all the estates, properties, rights, power, duties, and trusts of such predecessor Decommissioning Trustee.

(iii)

Any successor Decommissioning Trustee, however appointed, shall be a bank or trust company with trust powers incorporated and doing business in the United 15

States of America and having net worth of at least $150,000,000, if there be such an institution willing, able and legally qualified to perform the duties of Decommissioning Trustee hereunder upon reasonable or customary terms; provided however, that in calculating the $150,000,000 net worth requirement, the net worth of the Decommissioning Trustee's parent corporation and/or affiliates may be taken into account only if such entities guarantee Decommissioning Trustee's responsibilities to the Funds.

(iv)

Any corporation into which Decommissioning Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which Decommissioning Trustee shall be a party, or any corporation to which substantially all the corporate trust business of Decommissioning Trustee may be transferred, shall, subject to the terms of subsection 14(A)(iii), be Decommissioning Trustee under this Agreement without further act.

(v)

No successor Decommissioning Trustee (other than a successor by reason of an event described in Section 14(A)(iv)) shall be liable for any act, omission or breach of trust by a predecessor Decommissioning Trustee, whether or not such successor Decommissioning Trustee knows or should have known of such act, omission, or breach of trust, and shall have no duty to compel redress of any breach of trust by a predecessor Decommissioning Trustee.

(B)

If a Fiduciary Investment Manager is appointed by El Paso hereunder, such appointment shall be made in writing; however, El Paso may not serve as a Fiduciary Investment Manager. A Fiduciary Investment Manager may resign at any time without cause by giving at least thirty (30) days prior written notice to El Paso, and El Paso may remove a Fiduciary Investment Manager at any time with or without cause by giving written notice to such Fiduciary Investment Manager. The resignation or removal of a Fiduciary Investment Manager is not conditioned on the acceptance of appointment by a successor Fiduciary Investment Manager under this Section 14; provided, however, that if a Fiduciary Investment Manager other than the Decommissioning Trustee resigns or is removed and is not replaced by El Paso, Decommissioning Trustee shall, at that time, assume all investment responsibilities of such Fiduciary Investment Manager.

(i)

In appointing a Fiduciary Investment Manager, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether such Fiduciary Investment Manager's fee schedule for investment management services is reasonable when compared to other such managers; (b) a duty to investigate and determine whether the past performance of such Fiduciary Investment Manager in managing investments has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of such Fiduciary Investment Manager is adequate for purposes of liability; 16

(d) a duty to investigate and determine whether such Fiduciary Investment Manager is in compliance with the requirements of its investment management agreement and this Agreement as it relates to investments and to such Fiduciary Investment Manager; and (e) a duty to investigate any other factors which may bear on whether such Fiduciary Investment Manager is suitable.

SECTION 15. Successors and Assigns; Additional Parties. This Agreement shall be binding upon and inure to the benefit of each party and its successors and permitted assigns.

SECTION 16. Termination of Funds.

If not otherwise terminated sooner in accordance with the terms of this Agreement, each Fund shall end on the earlier of (A) the date specified in a written agreement between El Paso and Decommissioning Trustee and (B) the date that is twenty-one (21) years less one day after the death of the last survivor of the descendants living on the Effective Date of this Agreement of Joseph P. Kennedy, the father of president John F. Kennedy. Upon such termination, all of the assets of the Funds shall be distributed to El Paso.

Notwithstanding the foregoing provisions of this Section 16, if one or both of the Funds shall be or become valid under Applicable Law for a period subsequent to the date set out in Section 16(B) (or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the creation of such a fund for a period in gross exceeding the period for which such Fund is hereinabove stated to extend and be valid), then such Fund shall not terminate as aforesaid but shall extend to and continue in effect until (but only if such nontermination and extension shall then be valid under Applicable Law) such time as such Fund shall, under Applicable Law, cease to be valid.

SECTION 17. Accountings; Tax Returns and Reports; Audits. Decommissioning Trustee shall keep a&curate and detailed records and accounts of all investments, receipts, disbursements and other transactions of the Funds. All accounts, books, and records relating to the Funds shall be open to inspection and audit at all reasonable times by El Paso, its designee or an applicable governmental agency having jurisdiction over the Funds.

Within thirty (30) business days after the end of each calendar month and within thirty (30) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee has become effective, Decommissioning Trustee shall furnish to El Paso a written account setting forth all (A) investments, receipts, disbursements, and other transactions effected by it during such month or year, as applicable, or during the part of the month or year to the date any such resignation or removal is effective, as applicable, and containing a description of all assets, including but not limited to all securities, purchased and sold (the description of the securities purchased must state the price at which each individual security was purchased), the cost or net proceeds of sale, and the securities and investments held at the end of such period, (B) the gains or losses realized by each Fund upon sales or other disposition of its assets, (C) the increase or decrease in the value of each Fund, (D) the fair market values of each Fund, and (E) the liabilities (excluding liability for Decommissioning) of the Funds incurred or unpaid at the end of such period. Within three (3) business days after the end of each calendar month and within three (3) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee 17

has become effective, Decommissioning Trustee shall also provide El Paso secured web-based access to the information described in clauses (A) - (E) of this Section 17. The accounting shall also furnish El Paso such other information as Decommissioning Trustee may possess and as may be necessary for El Paso, Decommissioning Trustee and/or a Fiduciary Investment Manager to comply with any reporting requirements applicable to any of such parties and/or the Funds. If the fair market value of an asset in a Fund is not available, when necessary for accounting or reporting purposes the fair market value of the asset shall be determined in good faith by Decommissioning Trustee, assuming an orderly liquidation at the time of such determination. In addition, upon the written request of El Paso, which may be at any time and from time to time, Decommissioning Trustee shall provide El Paso the fair market value of the assets in a Fund as of a date other than the last day of a month or an annual accounting period of a Fund. If there is a disagreement between the Decommissioning Trustee, a Fiduciary Investment Manager and/or any other party as to any act or transaction reported in an accounting, Decommissioning Trustee or the Fiduciary Investment Manager, as applicable, shall have the right to have such disagreement settled by a court of competent jurisdiction. Decommissioning Trustee shall make such other reports as may be agreed upon in writing with El Paso.

Decommissioning Trustee shall retain its records and accountings related to the Funds as long as necessary for the proper administration thereof and at least for any period required by any applicable law, but with respect to each record and account for not less than six (6) years following the creation thereof.

El Paso shall have the right to cause the books, records, and accounts of Decommissioning Trustee that relate to the Funds to be examined and audited by independent auditors designated by El Paso at such times as El Paso may determine, and Decommissioning Trustee shall make such books, records, and accounts available for such purposes at all reasonable times.

El Paso shall, with the cooperation of Decommissioning Trustee, prepare or, upon agreement of Decommissioning Trustee, authorize Decommissioning Trustee to prepare, such tax returns and other reports for or with respect to each Fund as may be required from time to time by Applicable Law.

SECTION 18. Rights of Decommissioning Trustee.

(A)

Decommissioning Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement or required by the Texas Trust Code, and no implied duties or obligations shall be read into this Agreement against Decommissioning Trustee except such as are required by the Texas Trust Code.

(B)

Decommissioning Trustee shall not have any obligation to invest, manage, control, make any payment from, or otherwise deal with, the Funds except as expressly provided herein or in written guidelines or instructions received pursuant to the terms hereof.

(C)

Decommissioning Trustee may rely and shall be protected in acting upon any certificate, statement, notice, or other writing believed by it to be genuine and to have been signed or presented by the proper party or parties, and unless it has actual knowledge to the contrary, Decommissioning Trustee shall not be bound to make any investigation into the facts or matters stated in any certificate, statement, notice, or other writing received by it.

18

(D)

In the administration of the Funds hereunder, Decommissioning Trustee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and employed by it, and Decommissioning Trustee shall not be liable for anything done or omitted by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons to the extent permitted by law and to the extent no such action or omission constitutes negligence or willful misconduct by Decommissioning Trustee.

(E)

With respect to any obligation of El Paso hereunder to indemnify Decommissioning Trustee, Decommissioning Trustee shall look solely to El Paso and shall not have any lien upon the assets of the Funds to secure such obligation.

SECTION 19. Notices.

(A)

Except as otherwise provided in this Agreement, all notices under this Agreement shall be in writing and be effective upon receipt if delivered by (1) hand, (2) certified or registered United States Mail postage prepaid, or (3) facsimile, provided that service by facsimile after 5:00 p.m. local time of the recipient shall be deemed delivered on the following business day, as follows:

If notice is to the Trustee:

Bank of America Attention: El Paso Electric Company Relationship Manager 303 West Wall P.O. Box 270 Midland, TX 79702-0270 If notice is to the Grantor:

El Paso Electric Company Attention: Controller 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4772 and, if the notice is sent for the purposes described in Sections 5, 14(A), 14(B), and 19(B), with a copy to:

El Paso Electric Company Office of the General Counsel 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4747 (B)

Each person may change its address for purposes of notice under this Agreement 19

by notice complying with Section 20(A).

Any notice required under this Agreement may be waived in writing by the party entitled thereto.

SECTION 20. Counterpart Execution.

This Agreement may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

SECTION 21. Effective Date.

This Agreement shall become effective on the "Effective Date" as defined herein.

IN WITNESS WIHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the day and year above written.

20

EL PASO:

EL PASO ELECTRIC COMPANY DECOMMISSIONING TRUSTEE:

BANK OF AMERICA, N.A., a national banking association By:

Vic Tidt.,jVice Pres-ident-STATE OF TEXAS COUNTY OF EL PASO I

SS.

The foregoing instrument was acknowledged before me this by IcrtL 1 D h)ix 'w ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation.

A Si-day of of EL PASO Y'A)n k0AJP Notary Public My coussion expires:

Illa

)*SQOcJ7 21

STATE OF TEXAS

§

§ ss.

COUNTY OF MIDLAND

§ The foregoing instrument was acknowledged before me this 1 tk day of December, 2003 by John R. Peterson Vice President of BANK OF AMERICA, N.A., a national banking association, on behalf of said association.

Notary Public My commission expires:

,02 -7d xm 22

Appendix A to Decommissioning Trust Agreement for Palo Verde Nuclear Generating Station Unit 1 DEFINITION OF TERMS ANPP Participation Agreement shall mean the Arizona Nuclear Power Project Participation Agreement, dated as of August 23, 1973, as amended, among Arizona Public Service Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company, Public Service Company of New Mexico, Southern California Public Power Authority, Department of Water and Power of The City of Los Angeles, and El Paso.

Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses, and permits of any federal, state, county, municipal, foreign, international, regional, or other governmental authority, agency, board, body, instrumentality, or court, and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator, or other judicial or quasi-judicial tribunal (including those pertaining to health, safety, the environment, or otherwise).

Applicable Tax Law shall mean Code Section 468A, any comparable subsequent provisions of the Code, the United States Treasury regulations promulgated under such section or provisions, and other provisions of the Code relating to the federal taxation of the Funds.

Code shall mean the Internal Revenue Code of 1986, as amended, or any successor law.

Decommissioning shall mean the decommissioning and retirement from service of Unit 1, and the related possession, maintenance, and disposal of material, radioactive or otherwise used in or produced by or relating to Unit 1, including, without limitation: (i) placement and maintenance in a state of protective storage; (ii) in-place entombment and maintenance; (iii) dismantlement; (iv) removal, decontamination and disposition of equipment and fixtures; (v) razing; (vi) removal and disposition of debris related to Unit 1 from the PVNGS Site; (vii) restoration of the PVNGS Site related to Unit I for unrestricted use; (viii) any other actions relating to decommissioning and retirement from service of Unit 1 required by the NRC; and (ix) all activities undertaken incident to the implementation thereof.

Decommissioning Cost shall mean El Paso's pro-rata share, under the ANPP Participation Agreement, of the greater of (i) the latest estimate of Termination Costs (as that term is defined by the ANPP Participation Agreement) for Unit 1 or (ii) the minimum amount required by the NRC to be funded for the decommissioning of Unit 1.

Deemed Distribution Amount shall mean an amount in the Decommissioning Trust Fund that is treated by Applicable Tax Law as having been distributed by reason of the disqualification of all or a part of such Fund.

Excess Contribution shall mean the amount by which cash payments made (or deemed made) by El Paso into the Decommissioning Trust Fund during any taxable year of El Paso exceeds the payment limitation imposed by Applicable Tax Law.

Expenses shall mean:

(a) in the case of the Decommissioning Trust Fund, (i) the tax imposed by Code Section 468A(e)(2); (ii) any state or local tax imposed on the income or the assets of such Fund; and (iii) legal, accounting, and actuarial fees and expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund, but in each case only to the extent permitted by Code Section 468A(e)(4)(B) or other Applicable Tax Law to be paid from the assets of a "Nuclear Decommissioning Reserve Fund," as that term is used in Applicable Tax Law; and (b) in the case of the Second Fund, (i) any federal, state, or local tax actually paid by El Paso with respect to the income or the assets of such Fund including a payment to El Paso of the federal income tax (at the statutory rate) with respect to the taxable income of such Fund required to be included on El Paso's federal income tax return; and (ii) legal, accounting and actuarial expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund; provided, however, Expenses shall not include taxes on or with respect to fees paid to Decommissioning Trustee or a Fiduciary Investment Manager and taxes that Code Section 4951 requires be paid by Decommissioning Trustee.

Fiduciary Investment Manager shall mean any institution or professional appointed by El Paso, other than Decommissioning Trustee, who is responsible for the investment and reinvestment of the Funds.

License shall mean NRC Facility Operating License No. NPF-41, issued December 31, 1984, as the same may be amended, modified, extended, renewed or superseded from time to time.

NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.

PVNGS shall mean the Palo Verde Nuclear Generating Station, which is located on the PVNGS Site.

PVNGS Site shall mean the real property located in Maricopa County, Arizona, approximately 36 miles west of the City of Phoenix, Arizona and approximately 16 miles west of the City of Buckeye, Arizona, which legal description is contained in Appendix B to the ANPP Participation Agreement.

Qualified Investments shall mean investments that meet the intent, standards, liabilities, and general and specific requirements and conditions on investments as set forth in Section 7 herein.

Unit 1 shall mean the 1,270 megawatt unit, commonly known as Unit 1, at PVNGS.

DECOMMISSIONING TRUST AGREEMENI N Dated as of December 18, 2003 between EL PASO ELECTRIC COMPANY and BANK OF AMERICA, N.A As Decommissioning Trustee for Palo Verde Unit 2

DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION UNIT 2 This Decommissioning Trust Agreement (the "Agreement"), to be effective as of December 24, 2003 (the "Effective Date"), between Bank of America, N.A., a national banking association ("Decommissioning Trustee") and El Paso Electric Company, a Texas corporation

("El Paso").

The Nuclear Regulatory Commission ("NRC"), an agency of the United States of America, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations codified in Title 10, Chapter 1 of the Code of Federal Regulations, Part 50, as amended. These regulations, applicable to El Paso, require that each holder of a license issued pursuant thereto must provide assurance that funds will be available for Decommissioning.

El Paso and others entered into the Arizona Nuclear Power Project Participation Agreement executed as of August 23, 1973 (the "ANPP Participation Agreement").

Amendment 13 to the ANPP Participation Agreement, effective June 15, 1991, requires El Paso to establish and maintain funds for the accumulation, over a period not in excess of the remaining term of the operating license for Unit 2 and the period thereafter until completion of Decommissioning, of funds sufficient to pay Decommissioning Cost.

In addition, El Paso is required by the Public Utility Commission of Texas ("PUCT"),

the New Mexico Public Regulation Commission ("NMPRC"), the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission to establish a source of funds to pay for Decommissioning.

Under Applicable Tax Law, certain federal income tax benefits are available to El Paso from establishing and making contributions to a "Nuclear Decommissioning Reserve Fund" for Unit 2. In order to satisfy its obligations under the ANPP Participation Agreement, to comply with the requirements of the governmental authorities referred to above, and to obtain such federal income tax benefits, on April 1, 1986, El Paso entered into a Decommissioning Trust Agreement, which was amended by Amendment No. 1 dated September 1, 1991 (the "Original Agreement"), creating two decommissioning trust funds to provide external funds for Decommissioning, for purposes of this Agreement designated as the Decommissioning Trust Fund and the Second Fund. The Decommissioning Trust Fund is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

On January 9, 1996, in Cause No. 92-10148-FM, styled In re: El Paso Electric Company, the United States Bankruptcy Court for the Western District of Texas (Austin Division) entered an order confirming the Fourth Amended Plan of Reorganization of El Paso (the "Plan"). In accordance with the Plan, which became effective on February 12, 1996, El Paso and Decommissioning Trustee restated and amended the Original Agreement to ensure that the Decommissioning Trust Fund and the Second Fund would continue to be held, managed and distributed, without interruption, in accordance with the terms of the Original Agreement, Applicable Law, and Applicable Tax Law.

2

This Agreement, in turn, amends and restates the Original Agreement, as restated and amended effective February 12, 1996, to read in its entirety as follows and continues the Decommissioning Trust Fund and the Second Fund.

Therefore, in consideration of the foregoing

premises, the acceptance by Decommissioning Trustee of the trusts created, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto restate and amend the Original Agreement, as restated and amended effective February 12, 1996, as follows:

SECTION 1. Definitions; References to Sections. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Appendix A hereto. Unless otherwise stated, references to a "Section" are to a section of this Agreement.

SECTION 2. Creation of Trust Funds. El Paso has established and hereby confirms the establishment with Decommissioning Trustee of the Decommissioning Trust Fund and the Second Fund (each a "Fund" and together the "Funds"). Each Fund shall include: (A) all cash and investments thereof, as more specifically described in Section 7; (13) all dividends, interest, cash, instruments, and other property from time to time received, receivable, or otherwise distributed or distributable in respect of or in exchange for any or all such investments; (C) all rights and privileges with respect to such investments; and (D) all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted.

SECTION 3.

Purpose of Trust Funds; Tax Qualification.

The Funds are for the accumulation and funding of amounts to pay costs, liabilities, and expenses of Decommissioning, including the accumulation, over a period not in excess of the remaining term of the operating license for Unit 2 and the period thereafter until completion of Decommissioning, of amounts which are sufficient to pay Decommissioning Cost.

The Decommissioning Trust Fund, but not the Second Fund, is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law. El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decomnmissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall seek to obtain the best possible tax treatment of amounts collected for nuclear plant decommissioning; and in this regard, El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall take maximum advantage of tax deductions and credits when it is consistent with sound business practices to do so. The assets of the Decommissioning Trust Fund must be used as authorized by section 468A of the Code and shall be used exclusively:

(A) subject to the limitations and conditions of Section 9, to satisfy, in whole or in part, El Paso's obligation to pay for Decommissioning; (B) subject to the limitations and conditions of Section 8, to pay Expenses; and (C) to the extent not currently required for the uses described in (A) and (B) above, and subject to the limitations and conditions of Section 7, for investment in Qualified Investments.

3

The Funds shall be used exclusively for Decommissioning of Unit 2. This Agreement may not be amended so as to violate section 468A of the Code or the regulations there under.

SECTION 4. Declaration and Acceptance of Trust.

Decommissioning Trustee accepts the trusts created hereby and declares that it will hold and administer all estate, right, title, and interest in and to each Fund upon the trusts set forth herein, but only on the terms of this Agreement, and agrees to receive and disburse all moneys and investments constituting any part of each Fund in accordance with this Agreement. No implied duties or obligations shall be read into this Agreement against Decommissioning Trustee. Decommissioning Trustee shall not commit any act, enter into any transaction, or permit any act or transaction to occur that is an "act of self dealing" between the Decommissioning Trust Fund and "a disqualified person" as those terms are defined by Applicable Tax Law, and, if such an act occurs, Decommissioning Trustee shall promptly take all necessary steps to correct it as soon as it has knowledge of the occurrence.

SECTION 5.

Ownership of Funds. Not in limitation of its fiduciary duty hereunder, title to any and all property held in each Fund shall be held by Decommissioning Trustee in its name as trustee as owner of record. At all times, Decommissioning Trustee shall follow the directives of (A) the applicable Fiduciary Investment Manager, if any, with respect to exercising any and all corresponding voting, consensual, and other rights accruing to the owner of such property in connection with such property, and, except as provided in this subsection 5.(A), (B)

El Paso with respect to exercising any and all such voting, consensual, and other rights.

Decommissioning Trustee shall have the right, in its name, as trustee upon prior written notice to El Paso, to settle, compromise, prosecute, or defend any action, claim, or proceeding with respect to any and all property held in each Fund.

Subject to the provisions of this Agreement, Decommissioning Trustee may sell, assign, endorse, pledge, transfer, and make any agreement respecting, or otherwise deal with, any and all property held in each Fund; provided, however, that except as required by Section 7, nothing herein contained shall be construed as requiring or obligating Decommissioning Trustee to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to any of the property held in each Fund. It is not the duty of Decommissioning Trustee or a Fiduciary Investment Manager to ensure that the Funds are adequate to pay for Decommissioning.

SECTION 6.

Payments into the Funds. From time to time, but not less than yearly, El Paso shall pay amounts into one or both of the Funds. El Paso may deposit all or any part of any payment entirely into the Decommissioning Trust Fund, entirely into the Second Fund, or partly into each in whatever proportion El Paso shall determine in its discretion; except that, if a deduction is allowed under Applicable Tax Law for payments into the Decommissioning Trust Fund, El Paso shall not make, and Decommissioning Trustee shall not accept, any payment into such Fund unless such payment (a) is in cash, to the extent Applicable Tax Law requires the payment to be in cash, and (b) complies with the amount limitation imposed by Applicable Tax Law and a deduction pursuant to Applicable Tax Law is allowed for the entire payment.

Decommissioning Trustee may accept from El Paso, as proof that these conditions are satisfied, a certificate executed by El Paso as to compliance with the amount limitation and deductibility of such payment, and, unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee may rely on such certificate without further inquiry or verification.

4

SECTION 7.

Investment of Funds.

(A)

Decommissioning Trustee. Any amounts held by Decommissioning Trustee in each Fund shall be invested and reinvested by it from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to Decommissioning Trustee a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of either Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as Decommissioning Trustee hereunder, and in performing any investment management functions hereunder, Decommissioning Trustee shall comply with the following:

(i) it shall add all income, including interest, earned on the corpus of each Fund to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have the continuing duty to review the assets of each Fund to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered and certified to Decommissioning Trustee as provided above, and any other applicable governing regulations; (iii) it shall not lend all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, El Paso, its subsidiaries or affiliates or their successors or assigns, except that, if El Paso approves in writing, it may invest or reinvest amounts in the Funds in mutual funds that contain securities issued by El Paso provided such 5

securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vi)

Notwithstanding anything to the contrary in this Agreement, if directed by El Paso, Decommissioning Trustee shall hold and maintain one or both of the Funds in a segregated account and invest and administer such Fund(s) separately from the assets of Decommissioning Trustee or other trusts.

(B)

Fiduciar Investment Manager.

Any amount of each Fund directed to be invested by a Fiduciary Investment Manager shall be invested and reinvested by Decommissioning Trustee as directed by such Fiduciary Investment Manager from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to a Fiduciary Investment Manager a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of a Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such written direction and certification without further inquir~y or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as a Fiduciary Investment Manager hereunder, a Fiduciary Investment Manager shall comply with the following:

(i) it shall direct the addition of all income, including interest, earned on the corpus of each Fund subject to its direction to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have a continuing duty to review the assets of each Fund subject to its direction to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered to such Fiduciary Investment Manager as hereinabove provided and any other applicable governing regulations; I(iii) it shall not direct the lending of all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors; (y) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, Decommissioning Trustee or any of Decommissioning Trustee's officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do 6

so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (vi) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by El Paso, its subsidiaries or affiliates or associates or their successors or assigns of El Paso, except that, if El Paso approves in writing, it may direct the investment or reinvestment of amounts in the Funds in mutual funds that contain securities issued by El Paso provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vii) it shall provide Decommissioning Trustee directives concerning voting, consensual, and other rights and powers accruing in connection with assets of the Funds subject to such Fiduciary Investment Manager's direction.

(C)

General. It is the intent of El Paso that neither Decommissioning Trustee nor a Fiduciary Investment Manager shall have any powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations that are set out in this Section 7.

(D)

Investments Standards. To the extent not inconsistent with the other provisions of this Section 7 and to the extent that Decommissioning Trustee does not currently require the assets of the Funds for the purpose of satisfying the liability of El Paso for Decommissioning and to pay Expenses:

(i)

'Decommissioning Trustee shall, in connection with investing and reinvesting assets of the Funds, exercise the same standard of care that a reasonable person would exercise in the same circumstances; provided, however, that this subsection 7.(D)(i) shall apply only as to those assets of the Funds that are not subject to the direction of a Fiduciary Investment Manager; and (ii) a Fiduciary Investment Manager appointed to direct the investment and reinvestment of all or any portion of the assets of the Funds shall, with respect to such assets subject to its direction, exercise the same degree of care that a reasonable person would exercise in the same circumstances.

For purposes of this subsection entitled "Investment Standards", a "reasonable person" means a prudent investor as described in Chapter 117, Uniform Prudent Investor Act, of the Texas Property Code.

(E)

Qualified Investments. Qualified Investments include those investments meeting the investment standards, limitations, conditions, and requirements prescribed in the foregoing subsections of this Section 7 and the following criteria which may be amended by El Paso upon written notice to Decommissioning Trustee and each Fiduciary Investment Manager.

(i)

Investment Portfolio Goals. The Funds shall be invested consistent with the goals set forth in this subsection 7.(E)(i).

7

(a)

Assets of the Decommissioning Trust Fund shall be invested only as permitted for a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

(b)

Assets of the Funds shall be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the Funds.

(c)

In keeping with prudent investment practices, the portfolio of securities held in the Funds shall be diversified to the extent reasonably feasible given the size of the Funds.

(d)

Asset allocation and the acceptable risk level of the assets of the Funds should take into account market conditions, the time horizon remaining before the commencement and completion of Decommissioning, and the funding status of the Funds. While maintaining an acceptable risk level consistent with the goal referenced in subsection 7.(E)(i)(b) of this Section 7, the investment emphasis when the remaining life of the liability, as defined in subsection 7.(E)(ii)(d)(4) of this subsection, exceeds five years should be to maximize net long-term earnings.

The investment emphasis in the remaining investment period of the Funds should be on current income and the preservation of each Fund's assets.

(e)

In selecting investments, the impact of the investment on the volatility and expected return of the assets of the Funds, net of fees, commissions, expenses, and taxes should be considered.

(ii)

General Requirements.

The restrictions contained in this subsection 7.(E)(ii)apply to the Decommissioning Trust Fund and Second Fund in the aggregate.

For purposes of this subsection 7.(E)(ii), a commingled funds is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.

(a)

Diversification. For the purpose of this subsection 7.(E)(ii)(a), a commingled or mutual fund is not considered a security; rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including those held in commingled or mutual funds) held in the Funds contains securities with an aggregate value in excess of $20 million, it shall be diversified such that:

(1) no more than five percent (5%) of the securities held may be issued by one entity, with the exception of the federal government, its agencies and instrumentalities; and 8

(2) the portfolio shall contain at least 20 different issues of securities, and municipal securities and real estate investments shall be diversified as to geographic region.

(b)

Derivatives.

The use of derivative securities in the Funds is limited to those whose purpose is to enhance returns of the Funds without a corresponding increase in risk or to reduce risk of the assets of the Funds. Derivatives may not be used to increase the value of the assets of the Funds by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of collateralized mortgage obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics.

(c)

Leverage. The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for a Fund is prohibited.

(d)

Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value:

(1) except as noted in subsection 7.(E)(2)(b), when the weighted average remaining life of the liability exceeds 5 years, the equity cap shall be sixty percent (60%);

(2) when the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be thirty percent (3 0%). Additionally, during all years in which expenditures for Decommissioning occur, the equity cap shall also be thirty percent (30%);

(3) when the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be zero percent (0%);

(4) for purposes of this subsection 7.(E)(ii)(4), the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each Decommissioning outlay, where the weights are based on each year's expected Decommissioning expenditures divided by the amount of the remaining liability in that year; and 9

(5) should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the market value of the non-fixed income investments shall be reduced below the cap as soon as practicable.

Such reductions may be accomplished by investing all future contributions to a Fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities.

(iii)

Specific Investment Restrictions.

The restrictions contained in this subsection 7.(E)(iii). apply to the Decommissioning Trust Fund and the Second Fund in the aggregate.

(a)

Fixed-income investments.

Assets of the Funds shall not be invested in corporate or municipal debt securities that have a bond rating below investment grade "BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased. If the debt rating of a company or municipality issuing the particular debt security falls below investment grade at some time after the security was purchased, the appropriateness of continuing to hold such security shall be reexamined. The overall portfolio of debt instruments shall have a quality level, measured quarterly not below an "AA" grade by Standard & Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating.

(b)

Equity Investments.

(1)

At least seventy percent (70%) of the aggregate market value of the equity assets of the Funds, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 Index assuming equal weighting of each ranked security in the Index. If the quality rating, measured quarterly, falls below the minimum quality standard, the quality level of the equity assets of the Funds shall be increased to the required level as soon as is practicable and prudent: and (2) assets of the Funds shall not be invested in equity securities if the issuer has a capitalization of less than $100 million.

10

(c)

Commingled funds. The following guidelines shall apply to the investments made through commingled funds.

Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds.

(1)

The commingled funds should be selected consistent with the investment goals specified in subsection 7.(E)(ij and the general requirements in subsection 7.(E)(ii);

(2) in evaluating the appropriateness of a particular commingled fund, the following duties shall be of a continuing nature:

(I) a duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) a duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) a duty to investigate the reasonableness of the net after-tax return and risk of the commingled fund relative to similar funds, and the appropriateness of the commingled fund within all of the assets of the Funds; (3) the payment of load fees shall be avoided; and (4) commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the Funds' overall investment portfolio mix.

Notwithstanding any other provision of this Section 7, nothing in this Section 7 shall be construed to permit any investment otherwise prohibited by any other provision of this Agreement, Applicable Law, or Applicable Tax Law. This Agreement and the investments of the Funds shall be interpreted and construed in a manner consistent with the parties' intention that this Agreement and the Funds at all times comply with all requirements of the Nuclear Regulatory Commission and other applicable governmental regulations and rules, including without limitation the rules of the PUCT, the NMPRC, and the Federal Energy Regulatory Commission, including but not limited to the "Final Rule" regarding the formation, organization and purposes of nuclear plant decommissioning trust funds and for fund investments issued June 16, 1995, as may be amended from time to time.

11

SECTION 8. Expenses; Indemnification. El Paso shall pay all Expenses and, subject to Section 9.(D), may direct Decommissioning Trustee, in writing, to pay specified Expenses of a Fund from such Fund. El Paso shall certify in writing to Decommissioning Trustee whether and the extent to which an item is an Expense of a specified Fund and whether Applicable Tax Law permits its payment out of the assets of the Fund; and Decommissioning Trustee may, unless it has actual knowledge to the contrary, rely upon such certification without further inquiry or verification.

Except to the extent Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon the existence of any fact or state of facts represented to it in writing by El Paso or a duly appointed Fiduciary Investment Manager.

Except with respect to liability or fiduciary responsibility for any error or loss that may result by reason of the exercise or non-exercise of the duties, obligations, and/or fiduciary responsibility which are allocated to Decommissioning Trustee herein which is determined to be the result of Decommissioning Trustee's own negligence or willful misconduct, El Paso shall indemnify Decommissioning Trustee, directly from El Paso's own assets (including the proceeds of any insurance policy the premiums of which are paid from El Paso's own assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration or investment of the Funds. Decommissioning Trustee shall not be liable for any action taken by Decommissioning Trustee or any failure to act by Decommissioning Trustee if the action taken or the failure to act was directed by El Paso or a Fiduciary Investment Manager, if Decommissioning Trustee reasonably relied on such direction.

This Section 8 shall survive the termination of this Agreement.

SECTION 9.

Payments and Distributions from the Funds.

(A)

Subject to the other provisions of this Section 9, Decommissioning Trustee shall make payments out of the Funds upon presentation by El Paso of (A) a certificate signed by El Paso (i) instructing Decommissioning Trustee to disburse amounts in the Funds in a manner designated in such certificate for purposes of paying for Decommissioning and (ii) certifying that disbursements, if any, directed to be made from assets of the Decommissioning Trust Fund are for payment of only those costs, liabilities, and expenses of Decommissioning that qualify as "nuclear decommissioning costs" under Applicable Tax law, and (B) documentation reasonably acceptable to Decommissioning Trustee that such payment for Decommissioning is due and payable.

(B)

Upon termination of the Decommissioning Trust Fund under Applicable Tax Law, El Paso may direct Decommissioning Trustee to transfer all property remaining in the Decommissioning Trust Fund to El Paso for disbursement or distribution as may then be provided by law. In addition, upon its receipt of a certificate signed by El Paso certifying that Decommissioning has been completed under Applicable Law and all costs of Decommissioning have been paid in full, all property then held in both Funds shall be paid by Decommissioning Trustee to El Paso for disbursement or distribution as may then be provided by law and the Funds shall terminate.

12

(C)

At any time and from time to time El Paso may direct Decommissioning Trustee in writing to, and upon receipt of such direction Decommissioning Trustee shall, subject to the applicable provisions of Section 9.(D), distribute to El Paso for disbursement or distribution as then may be provided or permitted by law or transfer from the Decommissioning Trust Fund to the Second Fund any:

(i)

Deemed Distribution Amount that El Paso certifies in writing is deemed distributed under Applicable Tax Law; (ii)

Excess Contribution that El Paso certifies in writing (a) has occurred under Applicable Tax Law, and (b) is being transferred within the time permitted for withdrawal or transfer of such Excess Contribution by Applicable Tax Law; and (iii) amount that El Paso certifies in writing may be transferred to the Second Fund in accordance with Applicable Law and Applicable Tax Law by reason of the disposition of all or a part of El Paso's interest in or license to possess Unit 2.

(D)

Notwithstanding any other provision in this Agreement, except for (i) payments made under Section 8 for Expenses, (ii) to the extent allowed by Applicable Law, Deemed Distribution Amounts and Excess Contributions transferred to the Second Fund or distributed to El Paso under Section 9.(C), and (iii) withdrawals made pursuant to 10 C.F.R. 50.82(a)(8) no disbursement or payment from the Funds shall be made unless (a) thirty (30) business days prior written notice of the intention to make such disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, and the Director, Office of Nuclear Material Safety and Safeguards, and (b) Deconmmissioning Trustee has not received written notice of an objection during such thirty (30) day period from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards,. The notices required by this Sectidn 9.(D) may be made by or on behalf of Decommissioning Trustee.

(E)

Unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon any certificate described in Section 9 without further inquiry or verification.

SECTION 10. Further Assurances. El Paso agrees that it will, at its sole expense, do all such further acts and things and execute and deliver all such additional conveyances, assignments, agreements, and instruments, as may be necessary or desirable or as Decommissioning Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement, or relative to the Funds or any part thereof, or in order to assure and confirm unto Decommissioning Trustee its rights, powers, and remedies hereunder.

El Paso may provide general investment policies in writing to Decommissioning Trustee or a Fiduciary Investment Manager, but may not engage in the day-to-day management of the Funds or mandate, or itself make, individual investment decisions except to the extent that El Paso retains the right under this Agreement to approve investments in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, in mutual funds that contain securities issued by Decommissioning Trustee (subject to the limitations elsewhere herein set forth), or in mutual funds that contain securities issued by El Paso, its subsidiaries or affiliates or their successors or assigns (subject to the limitations elsewhere herein set forth).

13

El Paso will regularly supply to Decommissioning Trustee and to each Fiduciary Investment Manager, and regularly update, essential information about Unit 2 including its description, useful life, the Decommissioning plan that El Paso intends to follow, El Paso's anticipated liquidity needs once Decommissioning begins, and any other information that Decommissioning Trustee and a Fiduciary Investment Manager need to construct and maintain, over time, a sound investment plan for the Funds.

SECTION 11. Irrevocability and Modification. This Agreement is irrevocable and may not be amended or modified except by a writing signed by the parties hereto and approved, to the extent required by Applicable Law, by applicable regulatory authority(s). The parties agree that they will execute any amendments requested by El Paso that are necessary to secure and maintain the qualification of the Decommissioning Trust Fund as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law and the deduction of contributions to such Fund as provided by such law, or to comply with Applicable Law.

Not in limitation of the foregoing, if and to the extent that, now or in the future, federal tax law may extend certain tax benefits to a trust fund or funds that are created and maintained by El Paso for creation of a reserve or funds for costs associated with Decommissioning (hereinafter in this Section 11 referred to as such "other trusts") which such other trusts would qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law, including without limitation, Internal Revenue Code section 468A, only if established and maintained pursuant to a single trust agreement for a particular nuclear power plant, the parties hereto, upon the creation of such other trusts may amend this Agreement by attaching hereto as an allonge the governing instruments by which such other trusts may be created. In such event, such other trusts shall be administered under the terms of this Agreement to the extent not inconsistent with the governing instruments by which such other trusts may be created and such other trusts shall thereafter be administered as separate funds under the terms of this Agreement.

SECTION 12. Obligation for Decommissioning.

Nothing in this Agreement and no act or omission relating to the Funds shall be read, construed, understood, or interpreted to place any obligation whatsoever on Decommissioning Trustee or a Fiduciary Investment Manager relating to Decommissioning or any Decommissioning Cost, all of which shall at all times remain the sole obligation of El Paso.

SECTION 13. Governing Law. This Agreement shall be deemed to be a contract made in Texas for all purposes and shall be construed in accordance with and governed by the laws of such State, including the provisions of the Texas Trust Code, with respect to all matters of construction, validity, and performance.

SECTION 14. Resignation and Replacement of Decommissioning Trustee or Fiduciary Investment Manager.

(A)

Decommissioning Trustee may resign at any time without cause by giving at least 30 days prior written notice to El Paso, and El Paso may remove Decommissioning Trustee at any time with or without cause by giving written notice to Decommissioning Trustee, such resignation or removal to be effective on the acceptance of appointment by a successor Decommissioning Trustee under this Section 14.

In case of the resignation or removal of Decommissioning Trustee, El Paso may appoint a successor Decommissioning Trustee by an 14

instrument signed by El Paso. If a successor Decommissioning Trustee shall not have been appointed by El Paso within 30 days after the giving of such written notice of resignation or removal, Decommissioning Trustee or El Paso may apply to any court of competent jurisdiction to appoint a successor Decommissioning Trustee to act until such time, if any, as a successor Decommissioning Trustee shall have been appointed by El Paso and shall have accepted its appointment under this Section 14. Any successor Decommissioning Trustee so appointed by such court shall immediately and without further act be superseded by any successor Decommissioning Trustee appointed by El Paso as provided above.

(i)

In appointing a Decommissioning Trustee, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether Decommissioning Trustee's fee schedule for administering the trust is reasonable when compared to other institutional trustees rendering similar services; (b) a duty to investigate and determine whether the past administration of trusts by Decommissioning Trustee has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of Decommissioning Trustee is adequate; (d) a duty to investigate and determine whether Decommissioning Trustee is in compliance with the requirements of this Agreement; and (e) a duty to investigate any other factors which may bear on whether Decommissioning Trustee is suitable.

(ii)

Any successor Decommissioning Trustee, however appointed, shall execute and deliver to the predecessor Decommissioning Trustee an instrument accepting such appointment, and thereupon such successor Decommissioning Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties, and trusts of the predecessor Decommissioning Trustee with like effect as if originally named as Decommissioning Trustee herein; and such predecessor Decommissioning Trustee shall duly assign, transfer, deliver, and pay over to such successor Decommissioning Trustee all moneys or other property then held by such predecessor Decommissioning Trustee upon the trusts expressed in this Agreement, shall do all acts necessary to vest title of record in such successor Decommissioning Trustee, and shall transfer and deliver to such successor Decommissioning Trustee copies of all records pertaining to the Funds and this Agreement.

In addition, upon the written request of such successor Decommissioning Trustee, such predecessor Decommissioning Trustee shall execute and deliver to such successor Decommissioning Trustee an instrument transferring to such successor Decommissioning Trustee, upon the trusts expressed in this Agreement, all the estates, properties, rights, power, duties, and trusts of such predecessor Decommissioning Trustee.

(iii)

Any successor Decommissioning Trustee, however appointed, shall be a bank or trust company with trust powers incorporated and doing business in the United 15

States of America and having net worth of at least $150,000,000, if there be such an institution willing, able and legally qualified to perform the duties of Decommissioning Trustee hereunder upon reasonable or customary terms; provided however, that in calculating the $150,000,000 net worth requirement, the net worth of the Decommissioning Trustee's parent corporation and/or affiliates may be taken into account only if such entities guarantee Decommissioning Trustee's responsibilities to the Funds.

(iv)

Any corporation into which Decommissioning Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which Decommissioning Trustee shall be a party, or any corporation to which substantially all the corporate trust business of Decommissioning Trustee may be transferred, shall, subject to the terms of subsection 14(A)(iii), be Decommissioning Trustee under this Agreement without further act.

(v)

No successor Decommissioning Trustee (other than a successor by reason of an event described in Section 14(A)(iv)) shall be liable for any act, omission or breach of trust by a predecessor Decommissioning Trustee, whether or not such successor Decommissioning Trustee knows or should have known of such act, omission, or breach of trust, and shall have no duty to compel redress of any breach of trust by a predecessor Decommissioning Trustee.

(B)

If a Fiduciary Investment Manager is appointed by El Paso hereunder, such appointment shall be made in writing; however, El Paso may not serve as a Fiduciary Investment Manager. A Fiduciary Investment Manager may resign at any time without cause by giving at least thirty (30) days prior written notice to El Paso, and El Paso may remove a Fiduciary Investment Manager at any time with or without cause by giving written notice to such Fiduciary Investment Manager. The resignation or removal of a Fiduciary Investment Manager is not conditioned on the acceptance of appointment by a successor Fiduciary Investment Manager under this Section 14; provided, however, that if a Fiduciary Investment Manager other than the Decommissioning Trustee resigns or is removed and is not replaced by El Paso, Decommissioning Trustee shall, at that time, assume all investment responsibilities of such Fiduciary Investment Manager.

(i)

In appointing a Fiduciary Investment Manager, El Paso shall have the following duties which will be of a continuing nature:

(a) a duty to determine whether such Fiduciary Investment Manager's fee schedule for investment management services is reasonable when compared to other such managers; (b) a duty to investigate and determine whether the past performance of such Fiduciary Investment Manager in managing investments has been reasonable; (c) a duty to investigate and determine whether the financial stability and strength of such Fiduciary Investment Manager is adequate for purposes of liability; 16

(d) a duty to investigate and determine whether such Fiduciary Investment Manager is in compliance with the requirements of its investment management agreement and this Agreement as it relates to investments and to such Fiduciary Investment Manager; and (e) a duty to investigate any other factors which may bear on whether such Fiduciary Investment Manager is suitable.

SECTION 15. Successors and Assigns; Additional Parties. This Agreement shall be binding upon and inure to the benefit of each party and its successors and permitted assigns.

SECTION 16. Termination of Funds.

If not otherwise terminated sooner in accordance with the terms of this Agreement, each Fund shall end on the earlier of (A) the date specified in a written agreement between El Paso and Decommissioning Trustee and (B) the date that is twenty-one (21) years less one day after the death of the last survivor of the descendants living on the Effective Date of this Agreement of Joseph P. Kennedy, the father of president John F. Kennedy. Upon such termination, all of the assets of the Funds shall be distributed to El Paso.

Notwithstanding the foregoing provisions of this Section 16, if one or both of the Funds shall be or become valid under Applicable Law for a period subsequent to the date set out in Section 16(B) (or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the creation of such a fund for a period in gross exceeding the period for which such Fund is hereinabove stated to extend and be valid), then such Fund shall not terminate as aforesaid but shall extend to and continue in effect until (but only if such nontermination and extension shall then be valid under Applicable Law) such time as such Fund shall, under Applicable Law, cease to be valid.

SECTION 17. Accountings; Tax Returns and Reports; Audits. Decommissioning Trustee shall keep accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions of the Funds. All accounts, books, and records relating to the Funds shall be open to inspection and audit at all reasonable times by El Paso, its designee or an applicable governmental agency having jurisdiction over the Funds.

Within thirty (30) business days after the end of each calendar month and within thirty (30) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee has become effective, Decommissioning Trustee shall furnish to El Paso a written account setting forth all (A) investments, receipts, disbursements, and other transactions effected by it during such month or year, as applicable, or during the part of the month or year to the date any such resignation or removal is effective, as applicable, and containing a description of all assets, including but not limited to all securities, purchased and sold (the description of the securities purchased must state the price at which each individual security was purchased), the cost or net proceeds of sale, and the securities and investments held at the end of such period, (B) the gains or losses realized by each Fund upon sales or other disposition of its assets, (C) the increase or decrease in the value of each Fund, (D) the fair market values of each Fund, and (E) the liabilities (excluding liability for Decommissioning) of the Funds incurred or unpaid at the end of such period. Within three (3) business days after the end of each calendar month and within three (3) business days after the close of each annual accounting period of each Fund, and as soon as reasonably practicable after the resignation or removal of a Decommissioning Trustee 17

has become effective, Decommissioning Trustee shall also provide El Paso secured web-based access to the information described in clauses (A) - (E) of this Section 17. The accounting shall also furnish El Paso such other information as Decommissioning Trustee may possess and as may be necessary for El Paso, Decommissioning Trustee and/or a Fiduciary Investment Manager to comply with any reporting requirements applicable to any of such parties and/or the Funds. If the fair market value of an asset in a Fund is not available, when necessary for accounting or reporting purposes the fair market value of the asset shall be determined in good faith by Decommissioning Trustee, assuming an orderly liquidation at the time of such determination. In addition, upon the written request of El Paso, which may be at any time and from time to time, Decommissioning Trustee shall provide El Paso the fair market value of the assets in a Fund as of a date other than the last day of a month or an annual accounting period of a Fund. If there is a disagreement between the Decommissioning Trustee, a Fiduciary Investment Manager and/or any other party as to any act or transaction reported in an accounting, Decommissioning Trustee or the Fiduciary Investment Manager, as applicable, shall have the right to have such disagreement settled by a court of competent jurisdiction. Decommissioning Trustee shall make such other reports as may be agreed upon in writing with El Paso.

Decommissioning Trustee shall retain its records and accountings related to the Funds as long as necessary for the proper administration thereof and at least for any period required by any applicable law, but with respect to each record and account for not less than six (6) years following the creation thereof.

El Paso shall have the right to cause the books, records, and accounts of Decommissioning Trustee that relate to the Funds to be examined and audited by independent auditors designated by El Paso at such times as El Paso may determine, and Decommissioning Trustee shall make such books, records, and accounts available for such purposes at all reasonable times.

El Paso shall, with the cooperation of Decommissioning Trustee, prepare or, upon agreement of Decommissioning Trustee, authorize Decommissioning Trustee to prepare, such tax returns and other reports for or with respect to each Fund as may be required from time to time by Applicable Law.

SECTION 18. Rights of Decommissioning Trustee.

(A)

Decommissioning Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement or required by the Texas Trust Code, and no implied duties or obligations shall be read into this Agreement against Decommissioning Trustee except such as are required by the Texas Trust Code.

(B)

Decommissioning Trustee shall not have any obligation to invest, manage, control, make any payment from, or otherwise deal with, the Funds except as expressly provided herein or in written guidelines or instructions received pursuant to the terms hereof (C)

Decommissioning Trustee may rely and shall be protected in acting upon any certificate, statement, notice, or other writing believed by it to be genuine and to have been signed or presented by the proper party or parties, and unless it has actual knowledge to the contrary, Decommissioning Trustee shall not be bound to make any investigation into the facts or matters stated in any certificate, statement, notice, or other writing received by it.

18

(D)

In the administration of the Funds hereunder, Decommissioning Trustee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and employed by it, and Decommissioning Trustee shall not be liable for anything done or omitted by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons to the extent permitted by law and to the extent no such action or omission constitutes negligence or willful misconduct by Decommissioning Trustee.

(E)

With respect to any obligation of El Paso hereunder to indemnify Decommissioning Trustee, Decommissioning Trustee shall look solely to El Paso and shall not have any lien upon the assets of the Funds to secure such obligation.

SECTION 19. Notices.

(A)

Except as otherwise provided in this Agreement, all notices under this Agreement shall be in writing and be effective upon receipt if delivered by (1) hand, (2) certified or registered United States Mail postage prepaid, or (3) facsimile, provided that service by facsimile after 5:00 p.m. local time of the recipient shall be deemed delivered on the following business day, as follows:

If notice is to the Trustee:

Bank of America Attention: El Paso Electric Company Relationship Manager 303 West Wall PO. Box 270 Midland, TX 79702-0270 If notice is to the Grantor:

El Paso Electric Company Attention: Controller 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4772 and, if the notice is sent for the purposes described in Sections 5, 14(A), 14(B), and 19(B), with a copy to:

El Paso Electric Company Office of the General Counsel 123 W. Mills Avenue El Paso, Texas 79901 Facsimile (915) 521-4747 (B)

Each person may change its address for purposes of notice under this Agreement 19

by notice complying with Section 20(A).

Any notice required under this Agreement may be waived in writing by the party entitled thereto.

SECTION 20. Counterpart Execution.

This Agreement may be executed in any number of counterparts and by each of the parties hereto on separate counterparts; all such counterparts shall together constitute but one and the same instrument.

SECTION 21. Effective Date.

This Agreement shall become effective on the "Effective Date" as defined herein.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as of the day and year above written.

20

EL PASO:

EL PASO ELECTRIC COMPANY DECOMMISSIONING TRUSTEE:

BANK OF AMERICA, N.A., a national banking association By: z le 7

Tit ice President e4

STATE OF TEXAS COUNTY OF EL PASO I

ss.

The foregoing instrument was acknowledged befor this RC Cy a T c

ti bel of said c oat ELECTRIC COMPANY, a Texas corporation, on behalf of said corporation.

,/)o1 A'0,

-,- i m 9A Ig day of of EL PASO Notary Public My co ission expires:

f

/as 5s, o? &7 21

STATE OF TEXAS

§

§ COUNTY OF MIDLAND~eebr 203 b

§onR eesn

,Vc rsdn ss.

The foregoing instrument was acknowledged before me this 19th day of December, 2003 by John R. Peterson

,9 Vice President AMERICA, N.A., a national banking association, on behalf of said association.

Notary Public of BANK OF My commission expires:

02 O i

CY

,.~Q:Ale, GH (USLIC l

i

f;-OFTEXAS

/

MITm.

Exp. 02-07-04 22

Appendix A to Decommissioning Trust Agreement for Palo Verde Nuclear Generating Station Unit 2 DEFINITION OF TERMS ANPP Participation Agreement shall mean the Arizona Nuclear Power Project Participation Agreement, dated as of August 23, 1973, as amended, among Arizona Public Service Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company, Public Service Company of New Mexico, Southern California Public Power Authority, Department of Water and Power of The City of Los Angeles, and El Paso.

Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses, and permits of any federal, state, county, municipal, foreign, international, regional, or other governmental authority, agency, board, body, instrumentality, or court, and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator, or other judicial or quasi-judicial tribunal (including those pertaining to health, safety, the environment, or otherwise).

Applicable Tax Law shall mean Code Section 468A, any comparable subsequent provisions of the Code, the United States Treasury regulations promulgated under such section or provisions, and other provisions of the Code relating to the federal taxation of the Funds.

Code shall mean the Internal Revenue Code of 1986, as amended, or any successor law.

Decommissioning shall mean the decommissioning and retirement from service of Unit 2, and the related possession, maintenance, and disposal of material, radioactive or otherwise used in or produced by or relating to Unit 2, including, without limitation: (i) placement and maintenance in a state of protective storage; (ii) in-place entombment and maintenance; (iii) dismantlement; (iv) removal, decontamination and disposition of equipment and fixtures; (v) razing; (vi) removal and disposition of debris related to Unit 2 from the PVNGS Site; (vii) restoration of the PVNGS Site related to Unit 2 for unrestricted use; (viii) any other actions relating to decommissioning and retirement from service of Unit 2 required by the NRC; and (ix) all activities undertaken incident to the implementation thereof.

Decommissioning Cost shall mean El Paso's pro-rata share, under the ANPP Participation Agreement, of the greater of (i) the latest estimate of Termination Costs (as that term is defined by the ANPP Participation Agreement) for Unit 2 or (ii) the minimum amount required by the NRC to be funded for the decommissioning of Unit 2.

Deemed Distribution Amount shall mean an amount in the Decommissioning Trust Fund that is treated by Applicable Tax Law as having been distributed by reason of the disqualification of all or a part of such Fund.

Excess Contribution shall mean the amount by which cash payments made (or deemed made) by El Paso into the Decommissioning Trust Fund during any taxable year of El Paso exceeds the payment limitation imposed by Applicable Tax Law.

Expenses shall mean:

(a) in the case of the Decommissioning Trust Fund, (i) the tax imposed by Code Section 468A(e)(2); (ii) any state or local tax imposed on the income or the assets of such Fund; and (iii) legal, accounting, and actuarial fees and expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund, but in each case only to the extent permitted by Code Section 468A(e)(4)(B) or other Applicable Tax Law to be paid from the assets of a "Nuclear Decommissioning Reserve Fund," as that term is used in Applicable Tax Law; and (b) in the case of the Second Fund, (i) any federal, state, or local tax actually paid by El Paso with respect to the income or the assets of such Fund including a payment to El Paso of the federal income tax (at the statutory rate) with respect to the taxable income of such Fund required to be included on El Paso's federal income tax return; and (ii) legal, accounting and actuarial expenses, trustee's fees and expenses, and all other ordinary administrative costs and incidental expenses, incurred by Decommissioning Trustee, a Fiduciary Investment Manager, or El Paso in connection with the operation of such Fund; provided, however, Expenses shall not include taxes on or with respect to fees paid to Decommissioning Trustee or a Fiduciary Investment Manager and taxes that Code Section 4951 requires be paid by Decommissioning Trustee.

Fiduciary Investment Manager shall mean any institution or professional appointed by El Paso, other than Decommissioning Trustee, who is responsible for the investment and reinvestment of the Funds.

License shall mean NRC Facility Operating License No. NPF-41, issued December 31, 1984, as the same miy be amended, modified, extended, renewed or superseded from time to time.

NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.

PVNGS shall mean the Palo Verde Nuclear Generating Station, which is located on the PVNGS Site.

PVNGS Site shall mean the real property located in Maricopa County, Arizona, approximately 36 miles west of the City of Phoenix, Arizona and approximately 16 miles west of the City of Buckeye, Arizona, which legal description is contained in Appendix B to the ANPP Participation Agreement.

Qualified Investments shall mean investments that meet the intent, standards, liabilities, and general and specific requirements and conditions on investments as set forth in Section 7 herein.

Unit 2 shall mean the 1,270 megawatt unit, commonly known as Unit 2, at PVNGS.

DECOMMISSIONING TRUST AGREEME Dated as of December 18, 2003 t

between EL PASO ELECTRIC COMPANY and BANK OF AMERICA, NA.

As Decommissioning Trustee for Palo Verde Unit 3

DECOMMISSIONING TRUST AGREEMENT FOR PALO VERDE NUCLEAR GENERATING STATION UNIT 3 This Decommissioning Trust Agreement (the "Agreement"), to be effective as of December 24, 2003 (the "Effective Date"), between Bank of America, N.A., a national banking association ("Decommissioning Trustee") and El Paso Electric Company, a Texas corporation

("El Paso").

The Nuclear Regulatory Commission ("NRC"), an agency of the United States of America, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, has promulgated regulations codified in Title 10, Chapter I of the Code of Federal Regulations, Part 50, as amended. These regulations, applicable to El Paso, require that each holder of a license issued pursuant thereto must provide assurance that funds will be available for Decommissioning.

El Paso and others entered into the Arizona Nuclear Power Project Participation Agreement executed as of August 23, 1973 (the "ANPP Participation Agreement").

Amendment 13 to the ANPP Participation Agreement, effective June 15, 1991, requires El Paso to establish and maintain funds for the accumulation, over a period not in excess of the remaining term of the operating license for Unit 3 and the period thereafter until completion of Decommissioning, of funds sufficient to pay Decommissioning Cost.

In addition, El Paso is required by the Public Utility Commission of Texas ("PUCT"),

the New Mexico Public Regulation Commission ("NMPRC"), the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission to establish a source of funds to pay for Decommissioning.

Under Applicable Tax Law, certain federal income tax benefits are available to El Paso from establishing and making contributions to a "Nuclear Decommissioning Reserve Fund" for Unit 3. In order to satisfy its obligations under the ANPP Participation Agreement, to comply with the requirements of the governmental authorities referred to above, and to obtain such federal income tax benefits, on April 1, 1986, El Paso entered into a Decommissioning Trust Agreement, which was amended by Amendment No. 1 dated September 1, 1991 (the "Original Agreement"), creating two decommissioning trust funds to provide external funds for Decommissioning, for purposes of this Agreement designated as the Decommissioning Trust Fund and the Second Fund. The Decommissioning Trust Fund is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

On January 9, 1996, in Cause No. 92-10148-FM, styled In re: El Paso Electric Company, the United States Bankruptcy Court for the Western District of Texas (Austin Division) entered an order confirming the Fourth Amended Plan of Reorganization of El Paso (the "Plan"). In accordance with the Plan, which became effective on February 12, 1996, El Paso and Decommissioning Trustee restated and amended the Original Agreement to ensure that the Decommissioning Trust Fund and the Second Fund would continue to be held, managed and distributed, without interruption, in accordance with the terms of the Original Agreement, Applicable Law, and Applicable Tax Law.

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This Agreement, in turn, amends and restates the Original Agreement, as restated and amended effective February 12, 1996, to read in its entirety as follows and continues the Decommissioning Trust Fund and the Second Fund.

Therefore, in consideration of the foregoing premises, the acceptance by Decommissioning Trustee of the trusts created, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto restate and amend the Original Agreement, as restated and amended effective February 12, 1996, as follows:

SECTION 1. Definitions; References to Sections. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Appendix A hereto. Unless otherwise stated, references to a "Section" are to a section of this Agreement.

SECTION 2.

Creation of Trust Funds. El Paso has established and hereby confirms the establishment with Decommissioning Trustee of the Decommissioning Trust Fund and the Second Fund (each a "Fund" and together the "Funds"). Each Fund shall include: (A) all cash and investments thereof, as more specifically described in Section 7; (B) all dividends, interest, cash, instruments, and other property from time to time received, receivable, or otherwise distributed or distributable in respect of or in exchange for any or all such investments; (C) all rights and privileges with respect to such investments; and (D) all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted.

SECTION 3.

Purpose of Trust Funds; Tax Qualification. The Funds are for the accumulation and funding of amounts to pay costs, liabilities, and expenses of Decommissioning, including the accumulation, over a period not in excess of the remaining term of the operating license for Unit 3 and the period thereafter until completion of Decommissioning, of amounts which are sufficient to pay Decommissioning Cost.

The Decommissioning Trust Fund, but not the Second Fund, is intended at all times to qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law. El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall seek to obtain the best possible tax treatment of amounts collected for nuclear plant decommissioning; and in this regard, El Paso and the applicable Fiduciary Investment Manager(s), if any, and Decommissioning Trustee (but with respect to Decommissioning Trustee only as to those assets of the Funds that are not under the direction of a Fiduciary Investment Manager) shall take maximum advantage of tax deductions and credits when it is consistent with sound business practices to do so. The assets of the Decommissioning Trust Fund must be used as authorized by section 468A of the Code and shall be used exclusively:

(A) subject to the limitations and conditions of Section 9, to satisfy, in whole or in part, El Paso's obligation to pay for Decommissioning; (B) subject to the limitations and conditions of Section 8, to pay Expenses; and (C) to the extent not currently required for the uses described in (A) and (B) above, and subject to the limitations and conditions of Section 7, for investment in Qualified Investments.

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The Funds shall be used exclusively for Decommissioning of Unit 3. This Agreement may not be amended so as to violate section 468A of the Code or the regulations there under.

SECTION 4.

Declaration and Acceptance of Trust.

Decommissioning Trustee accepts the trusts created hereby and declares that it will hold and administer all estate, right, title, and interest in and to each Fund upon the trusts set forth herein, but only on the terms of this Agreement, and agrees to receive and disburse all moneys and investments constituting any part of each Fund in accordance with this Agreement. No implied duties or obligations shall be read into this Agreement against Decommissioning Trustee. Decommissioning Trustee shall not commit any act, enter into any transaction, or permit any act or transaction to occur that is an "act of self dealing" between the Decommissioning Trust Fund and "a disqualified person" as those terms are defined by Applicable Tax Law, and, if such an act occurs, Decommissioning Trustee shall promptly take all necessary steps to correct it as soon as it has knowledge of the occurrence.

SECTION 5. Ownership of Funds. Not in limitation of its fiduciary duty hereunder, title to any and all property held in each Fund shall be held by Decommissioning Trustee in its name as trustee as owner of record. At all times, Decommissioning Trustee shall follow the directives of (A) the applicable Fiduciary Investment Manager, if any, with respect to exercising any and all corresponding voting, consensual, and other rights accruing to the owner of such property in connection with such property, and, except as provided in this subsection 5.(A), (B)

El Paso with respect to exercising any and all such voting, consensual, and other rights.

Decommissioning Trustee shall have the right, in its name, as trustee upon prior written notice to El Paso, to settle, compromise, prosecute, or defend any action, claim, or proceeding with respect to any and all property held in each Fund.

Subject to the provisions of this Agreement, Decommissioning Trustee may sell, assign, endorse, pledge, transfer, and make any agreement respecting, or otherwise deal with, any and all property held in each Fund; provided, however, that except as required by Section 7, nothing herein contained shall be construed as requiring or obligating Decommissioning Trustee to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to any of the property held in each Fund. It is not the duty of Decommissioning Trustee or a Fiduciary Investment Manager to ensure that the Funds are adequate to pay for Decommissioning.

SECTION 6.

Payments into the Funds. From time to time, but not less than yearly, El Paso shall pay amounts into one or both of the Funds. El Paso may deposit all or any part of any payment entirely into the Decommissioning Trust Fund, entirely into the Second Fund, or partly into each in whatever proportion El Paso shall determine in its discretion; except that, if a deduction is allowed under Applicable Tax Law for payments into the Decommissioning Trust Fund, El Paso shall not make, and Decommissioning Trustee shall not accept, any payment into such Fund unless such payment (a) is in cash, to the extent Applicable Tax Law requires the payment to be in cash, and (b) complies with the amount limitation imposed by Applicable Tax Law and a deduction pursuant to Applicable Tax Law is allowed for the entire payment.

Decommissioning Trustee may accept from El Paso, as proof that these conditions are satisfied, a certificate executed by El Paso as to compliance with the amount limitation and deductibility of such payment, and, unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee may rely on such certificate without further inquiry or verification.

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SECTION 7.

Investment of Funds.

(A)

Decommissioning Trustee. Any amounts held by Decommissioning Trustee in each Fund shall be invested and reinvested by it from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to Decommissioning Trustee a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of either Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as Decommissioning Trustee hereunder, and in performing any investment management functions hereunder, Decommissioning Trustee shall comply with the following:

(i) it shall add all income, including interest, earned on the corpus of each Fund to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have the continuing duty to review the assets of each Fund to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered and certified to Decommissioning Trustee as provided above, and any other applicable governing regulations; (iii) it shall not lend all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, El Paso, its subsidiaries or affiliates or their successors or assigns, except that, if El Paso approves in writing, it may invest or reinvest amounts in the Funds in mutual funds that contain securities issued by El Paso provided such 5

securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vi)

Notwithstanding anything to the contrary in this Agreement, if directed by El Paso, Decommissioning Trustee shall hold and maintain one or both of the Funds in a segregated account and invest and administer such Fund(s) separately from the assets of Decommissioning Trustee or other trusts.

(B)

Fiduciar Investment Manager.

Any amount of each Fund directed to be invested by a Fiduciary Investment Manager shall be invested and reinvested by Decommissioning Trustee as directed by such Fiduciary Investment Manager from time to time, but only in Qualified Investments; provided, however, if El Paso has delivered to a Fiduciary Investment Manager a copy of an order of a state or federal regulatory agency that El Paso certifies is binding on El Paso and limits the investments in which all or a part of a Fund may be invested, the investment of such Fund shall not violate such order. A Fiduciary Investment Manager appointed by El Paso may direct investments and reinvestments of the Funds by written direction which shall certify that the directed investment qualifies as an investment in Qualified Investments and is within the limitation set forth in the preceding sentence. Decommissioning Trustee may rely upon such written direction and certification without further inquiry or verification unless Decommissioning Trustee has actual knowledge that the directed investment does not satisfy the conditions and limitations of this Section 7.

In performing its duties and exercising its powers as a Fiduciary Investment Manager hereunder, a Fiduciary Investment Manager shall comply with the following:

(i) it shall direct the addition of all income, including interest, earned on the corpus of each Fund subject to its direction to such corpus as a part thereof, and shall owe the same duties with regard to such income as it owes with regard to such corpus; (ii) it shall have a continuing duty to review the assets of each Fund subject to its direction to determine the appropriateness of the investments consistent with all terms, provisions and limitations of this Agreement, including without limitation to ensure compliance with the provisions of the investment guidelines of this Section 7, any order of a state or regulatory agency limiting investments that El Paso has delivered to such Fiduciary Investment Manager as hereinabove provided and any other applicable governing regulations; (iii) it shall not direct the lending of all or any part of either Fund to itself or to any of its officers or directors or permit any act of "self-dealing" prohibited by Applicable Tax Law; (iv) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by, itself or any of its officers or directors; (v) it shall not invest or reinvest amounts in either Fund with, or in any instrument or security issued by, Decommissioning Trustee or any of Decommissioning Trustee's officers or directors, except that, if El Paso directs it to do so in writing, it may invest or reinvest amounts in the Funds in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, and except that, if El Paso directs it to do 6

so in writing, it may invest amounts in the Funds in mutual funds that contain securities issued by Decommissioning Trustee provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; (vi) it shall not direct the investment or reinvestment of amounts in either Fund with, or in any instrument or security issued by El Paso, its subsidiaries or affiliates or associates or their successors or assigns of El Paso, except that, if El Paso approves in writing, it may direct the investment or reinvestment of amounts in the Funds in mutual funds that contain securities issued by El Paso provided such securities constitute no more than five percent (5%) of the fair market value of the assets of such mutual funds at the time of the investment; and (vii) it shall provide Decommissioning Trustee directives concerning voting, consensual, and other rights and powers accruing in connection with assets of the Funds subject to such Fiduciary Investment Manager's direction.

(C)

General. It is the intent of El Paso that neither Decommissioning Trustee nor a Fiduciary Investment Manager shall have any powers that are greater than those provided to trustees under the Texas Trust Code or that are inconsistent with the limitations that are set out in this Section 7.

(D)

Investments Standards. To the extent not inconsistent with the other provisions of this Section 7 and to the extent that Decommissioning Trustee does not currently require the assets of the Funds for the purpose of satisfying the liability of El Paso for Decommissioning and to pay Expenses:

(i)

Decommissioning Trustee shall, in connection with investing and reinvesting assets of the Funds, exercise the same standard of care that a reasonable person would exercise in the same circumstances; provided, however, that this subsection 7.(D)(i) shall apply only as to those assets of the Funds that are not subject to the direction of a Fiduciary Investment Manager; and (ii) a Fiduciary Investment Manager appointed to direct the investment and reinvestment of all or any portion of the assets of the Funds shall, with respect to such assets subject to its direction, exercise the same degree of care that a reasonable person would exercise in the same circumstances.

For purposes of this subsection entitled "Investment Standards", a "reasonable person" means a prudent investor as described in Chapter 117, Uniform Prudent Investor Act, of the Texas Property Code.

(E)

Qualified Investments. Qualified Investments include those investments meeting the investment standards, limitations, conditions, and requirements prescribed in the foregoing subsections of this Section 7 and the following criteria which may be amended by El Paso upon written notice to Decommissioning Trustee and each Fiduciary Investment Manager.

(i)

Investment Portfolio Goals. The Funds shall be invested consistent with the goals set forth in this subsection 7.(E)(i).

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(a)

Assets of the Decommissioning Trust Fund shall be invested only as permitted for a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law.

(b)

Assets of the Funds shall be invested with a goal of earning a reasonable return commensurate with the need to preserve the value of the assets of the Funds.

(c)

In keeping with prudent investment practices, the portfolio of securities held in the Funds shall be diversified to the extent reasonably feasible given the size of the Funds.

(d)

Asset allocation and the acceptable risk level of the assets of the Funds should take into account market conditions, the time horizon remaining before the commencement and completion of Decommissioning, and the funding status of the Funds.

While maintaining an acceptable risk level consistent with the goal referenced in subsection 7.(E)(i)(b) of this Section 7, the investment emphasis when the remaining life of the liability, as defined in subsection 7.(E)(ii)(d)(4) of this subsection, exceeds five years should be to maximize net long-term earnings.

The investment emphasis in the remaining investment period of the Funds should be on current income and the preservation of each Fund's assets.

(e)

In selecting investments, the impact of the investment on the volatility and expected return of the. assets of the Funds, net of fees, commnissions, expenses, and taxes should be considered.

(ii)

General Requirements.

The restrictions contained in this subsection 7.(E)(ii)apply to the Decommissioning Trust Fund and Second Fund in the aggregate.

For purposes of this subsection 7.(E)(ii), a commingled funds is defined as a professionally managed investment fund of fixed-income or equity securities established by an investment company regulated by the Securities Exchange Commission or a bank regulated by the Office of the Comptroller of the Currency.

(a)

Diversification. For the purpose of this subsection 7.(E)(ii)(a), a commingled or mutual fund is not considered a security; rather, the diversification standard applies to all securities, including the individual securities held in commingled or mutual funds. Once the portfolio of securities (including those held in commingled or mutual funds) held in the Funds contains securities with an aggregate value in excess of $20 million, it shall be diversified such that:

(1) no more than five percent (5%) of the securities held may be issued by one entity, with the exception of the federal government, its agencies and instrumentalities; and 8

(2) the portfolio shall contain at least 20 different issues of securities, and municipal securities and real estate investments shall be diversified as to geographic region.

(b)

Derivatives.

The use of derivative securities in the Funds is limited to those whose purpose is to enhance returns of the Funds without a corresponding increase in risk or to reduce risk of the assets of the Funds. Derivatives may not be used to increase the value of the assets of the Funds by any amount greater than the value of the underlying securities. Prohibited derivative securities include, but are not limited to, mortgage strips; inverse floating rate securities; leveraged investments or internally leveraged securities; residual and support tranches of collateralized mortgage obligations; tiered index bonds or other structured notes whose return characteristics are tied to non-market events; uncovered call/put options; large counter-party risk through over-the-counter options, forwards and swaps; and instruments with similar high-risk characteristics.

(c)

Leverage. The use of leverage (borrowing) to purchase securities or the purchase of securities on margin for a Fund is prohibited.

(d)

Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value:

(1) except as noted in subsection 7.(E)(2)(b), when the weighted average remaining life of the liability exceeds 5 years, the equity cap shall be sixty percent (60%);

(2) when the weighted average remaining life of the liability ranges between 5 years and 2.5 years, the equity cap shall be thirty percent (30%). Additionally, during all years in which expenditures for Decommissioning occur, the equity cap shall also be thirty percent (30%);

(3) when the weighted average remaining life of the liability is less than 2.5 years, the equity cap shall be zero percent (O0/%);

(4) for purposes of this subsection 7.(E)(ii)(4), the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each Decommissioning outlay, where the weights are based on each year's expected Decommissioning expenditures divided by the amount of the remaining liability in that year; and 9

(5) should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the market value of the non-fixed income investments shall be reduced below the cap as soon as practicable.

Such reductions may be accomplished by investing all future contributions to a Fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities.

(iii)

Specific Investment Restrictions.

The restrictions contained in this subsection 7.(E)(iii). apply to the Decommissioning Trust Fund and the Second Fund in the aggregate.

(a)

Fixed-income investments.

Assets of the Funds shall not be invested in corporate or municipal debt securities that have a bond rating below investment grade "BBB-" by Standard & Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased. If the debt rating of a company or municipality issuing the particular debt security falls below investment grade at some time after the security was purchased, the appropriateness of continuing to hold such security shall be reexamined. The overall portfolio of debt instruments shall have a quality level, measured quarterly not below an "AA" grade by Standard & Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating.

(b)

Equity Investments.

(1)

At least seventy percent (70%) of the aggregate market value of the equity assets of the Funds, including the individual securities in commingled funds, shall have a quality ranking from a major rating service such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 Index assuming equal weighting of each ranked security in the Index. If the quality rating, measured quarterly, falls below the minimum quality standard, the quality level of the equity assets of the Funds shall be increased to the required level as soon as is practicable and prudent: and (2) assets of the Funds shall not be invested in equity securities if the issuer has a capitalization of less than $100 million.

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(c)

Commingled funds. The following guidelines shall apply to the investments made through commingled funds.

Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds.

(1)

The commingled funds should be selected consistent with the investment goals specified in subsection 7.(E)(i) and the general requirements in subsection 7.(E)(ii);

(2) in evaluating the appropriateness of a particular commingled fund, the following duties shall be of a continuing nature:

(I) a duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (II) a duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (III) a duty to investigate the reasonableness of the net after-tax return and risk of the commingled fund relative to similar funds, and the appropriateness of the commingled fund within all of the assets of the Funds; (3) the payment of load fees shall be avoided; and (4) commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the Funds' overall investment portfolio mix.

Notwithstanding any other provision of this Section 7, nothing in this Section 7 shall be construed to permit any investment otherwise prohibited by any other provision of this Agreement, Applicable Law, or Applicable Tax Law. This Agreement and the investments of the Funds shall be interpreted and construed in a manner consistent with the parties' intention that this Agreement and the Funds at all times comply with all requirements of the Nuclear Regulatory Commission and other applicable governmental regulations and rules, including without limitation the rules of the PUCT, the NMPRC, and the Federal Energy Regulatory Commission, including but not limited to the "Final Rule" regarding the formation, organization and purposes of nuclear plant decommissioning trust funds and for fund investments issued June 16, 1995, as may be amended from time to time.

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SECTION 8. Expenses; Indemnification. El Paso shall pay all Expenses and, subject to Section 9.(D), may direct Decommissioning Trustee, in writing, to pay specified Expenses of a Fund from such Fund. El Paso shall certify in writing to Decommissioning Trustee whether and the extent to which an item is an Expense of a specified Fund and whether Applicable Tax Law permits its payment out of the assets of the Fund; and Decommissioning Trustee may, unless it has actual knowledge to the contrary, rely upon such certification without further inquiry or verification.

Except to the extent Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon the existence of any fact or state of facts represented to it in writing by El Paso or a duly appointed Fiduciary Investment Manager.

Except with respect to liability or fiduciary responsibility for any error or loss that may result by reason of the exercise or non-exercise of the duties, obligations, and/or fiduciary responsibility which are allocated to Decommissioning Trustee herein which is determined to be the result of Decommissioning Trustee's own negligence or willful misconduct, El Paso shall indemnify Decommissioning Trustee, directly from El Paso's own assets (including the proceeds of any insurance policy the premiums of which are paid from El Paso's own assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration or investment of the Funds. Decommissioning Trustee shall not be liable for any action taken by Decommissioning Trustee or any failure to act by Decommissioning Trustee if the action taken or the failure to act was directed by El Paso or a Fiduciary Investment Manager, if Decommissioning Trustee reasonably relied on such direction.

This Section 8 shall survive the termination of this Agreement.

SECTION 9.

Payments and Distributions from the Funds.

(A)

Subject to the other provisions of this Section 9, Decommissioning Trustee shall make payments out of the Funds upon presentation by El Paso of (A) a certificate signed by El Paso (i) instructing Decommissioning Trustee to disburse amounts in the Funds in a manner designated in such certificate for purposes of paying for Decommissioning and (ii) certifying that disbursements, if any, directed to be made from assets of the Decommissioning Trust Fund are for payment of only those costs, liabilities, and expenses of Decommissioning that qualify as "nuclear decommissioning costs" under Applicable Tax law, and (B) documentation reasonably acceptable to Decommissioning Trustee that such payment for Decommissioning is due and payable.

(B)

Upon termination of the Decommissioning Trust Fund under Applicable Tax Law, El Paso may direct Decommissioning Trustee to transfer all property remaining in the Decommissioning Trust Fund to El Paso for disbursement or distribution as may then be provided by law. In addition, upon its receipt of a certificate signed by El Paso certifying that Decommissioning has been completed under Applicable Law and all costs of Decommissioning have been paid in full, all property then held in both Funds shall be paid by Decommissioning Trustee to El Paso for disbursement or distribution as may then be provided by law and the Funds shall terminate.

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(C)

At any time and from time to time El Paso may direct Decommissioning Trustee in writing to, and upon receipt of such direction Decommissioning Trustee shall, subject to the applicable provisions of Section 9.(D), distribute to El Paso for disbursement or distribution as then may be provided or permitted by law or transfer from the Decommissioning Trust Fund to the Second Fund any:

(i)

Deemed Distribution Amount that El Paso certifies in writing is deemed distributed under Applicable Tax Law; (ii)

Excess Contribution that El Paso certifies in writing (a) has occurred under Applicable Tax Law, and (b) is being transferred within the time permitted for withdrawal or transfer of such Excess Contribution by Applicable Tax Law; and (iii) amount that El Paso certifies in writing may be transferred to the Second Fund in accordance with Applicable Law and Applicable Tax Law by reason of the disposition of all or a part of El Paso's interest in or license to possess Unit 3.

(D)

Notwithstanding any other provision in this Agreement, except for (i) payments made under Section 8 for Expenses, (ii) to the extent allowed by Applicable Law, Deemed Distribution Amounts and Excess Contributions transferred to the Second Fund or distributed to El Paso under Section 9.(C), and (iii) withdrawals made pursuant to 10 C.F.R. 50.82(a)(8) no disbursement or payment from the Funds shall be made unless (a) thirty (30) business days prior written notice of the intention to make such disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, and the Director, Office of Nuclear Material Safety and Safeguards, and (b) Decommissioning Trustee has not received written notice of an objection during such thirty (30) day period from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards,. The notices required by this Secti6n 9.(D) may be made by or on behalf of Decommissioning Trustee.

(E)

Unless Decommissioning Trustee has actual knowledge to the contrary, Decommissioning Trustee shall be fully protected in relying upon any certificate described in Section 9 without further inquiry or verification.

SECTION 10. Further Assurances. El Paso agrees that it will, at its sole expense, do all such further acts and things and execute and deliver all such additional conveyances, assignments, agreements, and instruments, as may be necessary or desirable or as Decommissioning Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement, or relative to the Funds or any part thereof, or in order to assure and confirm unto Decommissioning Trustee its rights, powers, and remedies hereunder.

El Paso may provide general investment policies in writing to Decommissioning Trustee or a Fiduciary Investment Manager, but may not engage in the day-to-day management of the Funds or mandate, or itself make, individual investment decisions except to the extent that El Paso retains the right under this Agreement to approve investments in time deposits, demand deposits, or money market accounts of Decommissioning Trustee, in mutual funds that contain securities issued by Decommissioning Trustee (subject to the limitations elsewhere herein set forth), or in mutual funds that contain securities issued by El Paso, its subsidiaries or affiliates or their successors or assigns (subject to the limitations elsewhere herein set forth).

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El Paso will regularly supply to Decommissioning Trustee and to each Fiduciary Investment Manager, and regularly update, essential information about Unit 3 including its description, useful life, the Decommissioning plan that El Paso intends to follow, El Paso's anticipated liquidity needs once Decommissioning begins, and any other information that Decommissioning Trustee and a Fiduciary Investment Manager need to construct and maintain, over time, a sound investment plan for the Funds.

SECTION 11. Irrevocability and Modification.

This Agreement is irrevocable and may not be amended or modified except by a writing signed by the parties hereto and approved, to the extent required by Applicable Law, by applicable regulatory authority(s).

The parties agree that they will execute any amendments requested by El Paso that are necessary to secure and maintain the qualification of the Decommissioning Trust Fund as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law and the deduction of contributions to such Fund as provided by such law, or to comply with Applicable Law.

Not in limitation of the foregoing, if and to the extent that, now or in the future, federal tax law may extend certain tax benefits to a trust fund or funds that are created and maintained by El Paso for creation of a reserve or funds for costs associated with Decommissioning (hereinafter in this Section 11 referred to as such "other trusts") which such other trusts would qualify as a "Nuclear Decommissioning Reserve Fund" under Applicable Tax Law, including without limitation, Internal Revenue Code section 468A, only if established and maintained pursuant to a single trust agreement for a particular nuclear power plant, the parties hereto, upon the creation of such other trusts may amend this Agreement by attaching hereto as an allonge the governing instruments by which such other trusts may be created. In such event, such other trusts shall be administered under the terms of this Agreement to the extent not inconsistent with the governing instruments by which such other trusts may be created and such other trusts shall thereafter be administered as separate fimds under the terms of this Agreement.

SECTION 12. Obligation for Decommissioning. Nothing in this Agreement and no act or omission relating to the Funds shall be read, construed, understood, or interpreted to place any obligation whatsoever on Decommissioning Trustee or a Fiduciary Investment Manager relating to Decomrniissioning or any Decommissioning Cost, all of which shall at all times remain the sole obligation of El Paso.